Unemployment Data Accuracy – Fact or Fiction

Unemployment Data Accuracy – Fact or Fiction

BLS adjustments reported they overstate Labor Force Participation Rate (LFPR) – For 2000 – 2010 the LFPR was overstated by 2.8%

Unemployment Data Accuracy – The BLS publishes a massive universe of data on the state of the US labor market.  Recently they reported that they have not captured the Labor Force Participation Rate correctly for the past 20 years.  They said they had overstated the percentage.

The BLS statement was:

The labor force participation rate that BLS projected for 2006 was 67.6 percent, but the actual rate was more than a percentage point lower, at 66.2 percent. Similarly, the projected rate for 2008 was 67.6 percent, but the actual rate was 66.0 percent. Finally, for 2010, the projected rate (67.5 percent) was nearly 3 percentage points higher than the actual rate (64.7 percent), which was much lower than expected because of the recession of 2007–09.

That adjustment means that almost 2,000,000 additional people were not in the labor force.  At the same time the BLS gave no indication that they have changed the methodology they used to generate that percentage.  Nor did they say they would go back and adjust the historical percentages that they had previously published.

A real question that has yet to be answered is the quality of the general unemployment percentages that was calculated in those periods. Was it correct?

Author: Victor Janulaitis

M. Victor Janulaitis is the CEO of Janco Associates. He has taught at the USC Graduate School of Business, been a guest lecturer at the UCLA's Anderson School of Business, a Graduate School at Harvard University, and several other universities in various programs.