Federal Reserve officials use government data to determine when to raise or lower interest rates. Congress and the White House use it to decide when to extend unemployment benefits or send stimulus payments. Investors place billions of dollars worth of bets tied to monthly reports on employment growth, inflation and retail sales.
But a new study says the integrity of that data is increasingly at risk.
The report, released Tuesday by the American Statistical Association, concludes that government statistics are currently reliable. But that could soon change, the study warns, citing factors such as shrinking budgets, falling survey response rates and the potential for political interference.
The authors — statisticians from George Mason University, the Urban Institute and other institutions — likened the statistical system to physical infrastructure like highways and bridges: vital, but often overlooked until something goes wrong.
“We see this kind of downward spiral as a threat, and that’s what we’re trying to address,” said Nancy Potok, who served as the United States’ chief statistician from 2017 to 2019 and was one of the report’s authors. “We’re not there yet, but if we don’t do something, this threat could become a reality in the not too distant future.”
The report, “The Nation’s Data at Risk,” highlights the threats facing statistics produced across the federal government, including data on education, health, crime and demographic trends.
However, the risks to financial data are particularly noteworthy because of the attention it receives from policymakers and investors. Most of this data is based on surveys of households or businesses. And response rates to government surveys have plummeted in recent years, as have private polls. The response rate to the Current Population Survey — the monthly survey of about 60,000 households that is the basis for the unemployment rate and other labor force statistics — has fallen to about 70 percent in recent months, from nearly 90 percent a decade ago .
“This is a slow train wreck,” said Erica Grossen, who led the Bureau of Labor Statistics, part of the Labor Department, during the Obama administration.
The problem could get worse. Faced with rising costs to conduct its surveys and a budget that hasn’t kept pace, the Bureau of Labor Statistics recently said it expects to reduce the size of the Current Population Survey by about 5,000 households next fiscal year, which begins in October.
Response rates for other government surveys — including those used to produce data on wages, job openings and consumer spending — also plummeted during the pandemic and have recovered only partially, if at all. Statistics agencies in other countries face similar issues: Britain’s Office for National Statistics last year temporarily suspended publication of data from the Labor Force Survey over concerns about its reliability.
There is no evidence that US financials have experienced a similar erosion in quality. Statisticians say they regularly review their data for evidence that low response rates lead to biased results and remain confident in their data – a conclusion supported by the American Statistical Association’s report.
But William Beach, who led the Bureau of Labor Statistics from 2019 to 2023, said the agency is nearing the point where it will no longer be able to release reliable monthly employment and unemployment figures for smaller demographic groups. such as Asian Americans and teenagers, or for less populated states.
“That’s the first thing you’re going to see in the future is less data being reported,” he said.
Representatives of the Bureau of Labor Statistics and the Census Bureau said they were confident in the reliability of their data. However, they acknowledged that declining response rates were a challenge.
“Issues such as privacy concerns, challenges in contacting respondents in cellphone-only households, and the availability of respondents when contacted all contributed to the decline,” Census Bureau deputy director Ron Jarmin said in a written statement. “We are researching and testing ways to stabilize or reverse this trend because a higher response rate means higher quality data.”
Statisticians and outside experts agree that federal statistics will eventually need to incorporate more data from private sources and administrative records alongside traditional surveys. That process has already begun: The Census Bureau, for example, uses data from private-sector aggregators Circana and Nielsen to supplement survey data for its monthly retail sales report.
But such an approach is resource-intensive, requiring government statisticians to collect and verify external data, understand how to merge disparate sources, and check the resulting statistics to ensure their reliability — all while continuing to produce reports. using traditional methods.
Resources for this kind of innovation were scarce. Funding for the Bureau of Labor Statistics has fallen 18 percent in inflation-adjusted terms since 2009, according to the American Statistical Association report. Other organizations have also seen their budgets shrink even as the cost of simply maintaining existing operations has risen.
“Dealers have a duty not only to produce this month’s or this quarter’s numbers, but also to constantly modernize so they don’t lose trust and quality,” Ms Grossen said. “But the history of underfunding over the last 20-odd years has at least meant that they have had less opportunity to research and push forward modernization plans that they know they need.”
The new report calls on Congress to provide more funding to statistical agencies, to ensure the continued reliability of their existing data so they can expand coverage of parts of the economy that are not well measured by traditional statistics. Existing employment data, for example, struggle to capture the rise of gig work.
But funding is not the only challenge, the report’s authors stressed. They said Congress should also make it easier for agencies to share data with each other so they can operate more efficiently. And they called for clearer safeguards to keep statistics agencies free from political interference.
The independence of these agencies drew attention during the Trump administration when the Commerce Department sought to add a citizenship question to the 2020 census — a move critics argued was intended to suppress responses in areas with of the Democrats. (The Trump administration has denied a political motive.)
The Supreme Court ultimately blocked the effort, but the episode highlighted that there are few legal provisions to ensure that statistical agencies can operate independently.
“The truth is that we relied on rules for the autonomy of statistical agencies and sometimes the rules are overturned,” said Ms. Potok, one of the report’s authors. “That’s why we’re saying Congress needs to legislate to make this issue of professional autonomy a statute.”
