By David Harrison
WASHINGTON -- U.S. statistical agencies are struggling to
measure the economy during disruptions from the coronavirus
pandemic, with lockdowns and widespread business closures making it
harder to gather information.
The result, experts say, is data that could significantly change
in the months and years to come, with revised estimates that likely
will be worse than current readings. Last week the Bureau of Labor
Statistics reported 701,000 lost jobs in March and warned that the
coronavirus shutdowns had affected its data-gathering efforts.
"Collection was adversely impacted due to the inability to reach
some respondents," the agency said in a document released alongside
the jobs report. The response rate to its business survey was 66%
in March, about 9 percentage points lower than average, the BLS
said.
Three agencies -- the BLS, the Bureau of Economic Analysis and
the U.S. Census Bureau -- produce some of the most closely followed
economic reports in the world, including the U.S. employment and
gross domestic product figures. Much of their work involves regular
monthly or quarterly surveys of households and businesses, either
in person, by phone or online.
Those reports are scrutinized during recessions, when people
look for signs of improvement and policy makers try to assess how
much stimulus to inject.
The shutdowns could also complicate the government's estimate of
inflation, which still relies partly on visits to stores to look at
prices. Because so many stores closed starting in the middle of
last month, it could be harder to determine prices. The BLS is
scheduled to release March inflation data on Friday.
The BLS, the BEA and the Census Bureau all declined to
comment.
One issue is that it has historically been hard for agencies to
get accurate readings at inflection points, such as the beginning
of a recession. Add in the complications of data-gathering brought
about by efforts to slow the spread of the coronavirus, and the
task becomes even more difficult.
For instance, officials use a statistical model to estimate how
many jobs were created from newly formed businesses and how many
were lost from permanently closed businesses. It is hard to get a
reliable estimate in the first few weeks of a recession, when
thousands of businesses are closing and laying off workers.
"Right around those turning points, the model, not surprisingly,
doesn't do that well," said Erica Groshen, former commissioner of
the BLS.
In 2008, during the last recession, the jobs report for the
month of September reported a loss of 159,000 jobs. Later revisions
brought that figure to a drop of more than 400,000.
Today's virus-related disruptions pose another problem. Because
so many small businesses are closed, either temporarily or
permanently, there is nobody to answer the phone and report how
many employees have been hired or laid off. It could be that survey
takers will be more likely to get responses from larger, less
vulnerable firms, which could skew the results.
Phone surveys still account for about a fifth of the business
data collected by the BLS. Over the past few years, agencies have
been moving toward electronic data collection, which could
alleviate some of these issues.
Estimates of U.S. GDP produced near the start of recessions have
also been significantly revised. In its first estimate, the BEA
reported the fourth quarter of 2008 saw a 3.8% contraction of GDP.
That figure was later revised to an 8.4% contraction.
One reason for the difference is that the economic output of
service industries such as law firms and movie theaters is hard to
measure, said Steve Landefeld, former BEA director. He said it is
almost impossible to capture the decline in service-sector activity
taking place at the start of a downturn.
"How do you estimate that when it falls off a cliff?" he
asked.
In a March 31 report, economists at Goldman Sachs said they
expected the first estimate of GDP for the second quarter of the
year will only capture two thirds of the decline in the economic
contributions of the service sector.
These measurement difficulties could have consequences. As
policy makers look to craft a response to the economic shock
brought about by the coronavirus pandemic, they will be looking at
data to determine how big a stimulus will be needed. If the
agencies' early estimates miss the full scope of the recession, the
government's response could be inadequate.
That could be a problem in future months, after the stay-at-home
orders are lifted, said Mr. Landefeld. If the economy is slow to
come back, the government will need to step in to spur lackluster
demand, he said.
"Then magnitudes do matter," he said. "How big of a hole do we
have and how much do we need to put into it to fill it?"
Write to David Harrison at david.harrison@wsj.com
(END) Dow Jones Newswires
April 08, 2020 05:44 ET (09:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.