While Georgians worry about a rising unemployment rate, several economists are arguing that the measurement itself is increasingly unreliable.
A careful assessment of how the data is collected and calculated leads to the firm conclusion that the true unemployment rate is higher. Or maybe lower. Or at least different. Maybe.
And while economists have long been skeptical about the rate’s accuracy, that monthly number is probably the most commonly cited economic indicator – providing the basic grist for all political and economic debate.
“It is potentially a huge issue,” said Princeton University economist Alan Krueger, one of three authors of the paper released by the National Bureau of Economic Research.
Some of the problem is that Americans are less likely to answer questions than they used to be. But some of the dependability issue is built into the way the government does the calculation.
That “bias,” the distortion cooked into the process, has doubled since 1994, Krueger and his colleagues argue.
Now, into the weeds:
To calculate the unemployment rate, the U.S. Census Bureau and U.S. Bureau of Labor Statistics takes samples of nearly 60,000 households. They are surveyed monthly for four consecutive months, left alone for eight months and then surveyed again monthly for the next four months.
That means that in each month, there are eight “rotation groups,” each of them intended to be representative of the population. The government then weights the groups to come up with an official unemployment rate.
So that weighting has a large effect on the result.
Krueger and his collaborators found that during the first half of 2014, the unemployment rate among people in the first month of being interviewed was 7.5 percent. However, for those in the final month of being interviewed, it was only 6.1 percent.
But the Bureau of Labor Statistics weighted the first interview more heavily, so the official unemployment rate for this period was 6.5 percent.
And here’s the thing, Krueger said: Maybe they are right. It’s hard to say.
“It is unclear which rotation group provides the most accurate measure of the unemployment rate,” he said.
The Krueger paper proposes changes, including revisions in how the surveys are collected, the questions asked and the interviewing methods.
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