Global| Jun 08 2020BLS Failed Its Mandate: "Fearless Publication of the Facts"
|in:Viewpoints
Summary
The Bureau of Labor Statistics (BLS) first commissioner Mr. Carroll D. Wright described the agency mandate, "Fearless Publication of the Facts". By its admission, BLS failed to live up to its mandate as it published two employment [...]
The Bureau of Labor Statistics (BLS) first commissioner Mr. Carroll D. Wright described the agency mandate, "Fearless Publication of the Facts". By its admission, BLS failed to live up to its mandate as it published two employment reports for April and May filled with distorted and corrupt data.
Substantial misclassifications of people working and not produced a "false narrative" about jobs and unemployment in April and May. The pandemic of 2020 will stand alone in American history, triggering the steepest economic contraction but without an accurate statistical record of job loss and the level of unemployment.
In April, BLS found that 8.1 million people were wrongly classified as employed. In May, even with additional guidance to Census interviewers, BLS said 5.4 million people that were classified as employed but should have been classified as unemployed.
The misclassification of people working and not working corrupted the reported numbers. For example, if employed workers were properly classified, as unemployed on temporary layoff, household employment for April and May would show a cumulative loss of approximately 32 million versus the published numbers of 18.5 million. The level of unemployment in May would stand close to 30 million, and the jobless rates for April and May would be 19.7% and 16.3%, respectively. The published unemployment rates are 14.7% for May and 13.3% for April.
BLS decision to publish distorted and misleading figures is based on a long-standing policy. BLS stated, "According to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reassign survey responses."
Defending "data integrity" is important, but defending a statistical system that has produced grossly inaccurate statistics is wrong. Even if adjusted numbers are only a "rough estimate" of the labor markets they portray a more accurate picture of what happened versus the published figures. What good is it to have more accurate statistics of the employment situation buried in an addendum out of sight of most users?
Former BLS Commissioner Ms. Janet Norwood said, "Change is a necessary part of a good statistical system, and we should not fear it. Just as there is no absolute certainty in statistical estimation, there is no absolute perfection in statistical methodology". BLS is defending a statistical process that failed.
The employment situation for April and May is far worse than the reported statistics. Investors, analysts, and politicians should look at the published data with a skeptical eye.
Viewpoint commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
Joseph G. Carson
AuthorMore in Author Profile »Joseph G. Carson, Former Director of Global Economic Research, Alliance Bernstein. Joseph G. Carson joined Alliance Bernstein in 2001. He oversaw the Economic Analysis team for Alliance Bernstein Fixed Income and has primary responsibility for the economic and interest-rate analysis of the US. Previously, Carson was chief economist of the Americas for UBS Warburg, where he was primarily responsible for forecasting the US economy and interest rates. From 1996 to 1999, he was chief US economist at Deutsche Bank. While there, Carson was named to the Institutional Investor All-Star Team for Fixed Income and ranked as one of Best Analysts and Economists by The Global Investor Fixed Income Survey. He began his professional career in 1977 as a staff economist for the chief economist’s office in the US Department of Commerce, where he was designated the department’s representative at the Council on Wage and Price Stability during President Carter’s voluntary wage and price guidelines program. In 1979, Carson joined General Motors as an analyst. He held a variety of roles at GM, including chief forecaster for North America and chief analyst in charge of production recommendations for the Truck Group. From 1981 to 1986, Carson served as vice president and senior economist for the Capital Markets Economics Group at Merrill Lynch. In 1986, he joined Chemical Bank; he later became its chief economist. From 1992 to 1996, Carson served as chief economist at Dean Witter, where he sat on the investment-policy and stock-selection committees. He received his BA and MA from Youngstown State University and did his PhD coursework at George Washington University. Honorary Doctorate Degree, Business Administration Youngstown State University 2016. Location: New York.