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.