High Survey Nonresponse Rates Impacting Accuracy of Monthly Jobs Reports

The BLS employs two primary surveys to gauge employment statistics: the Current Population Survey (CPS) and the Current Employment Statistics Survey (CES). Recent data indicates a significant drop in response rates for both surveys—CPS response rates fell from 90.3% in January 2013 to 70.5% in August 2024, while CES rates decreased from 63% in July 2014 to 43% in June 2024. This decline in participation can lead to biased estimates if the characteristics of nonresponding households differ significantly from those that do respond. Economic analysts, including BLS officials, have expressed concern that these nonresponse rates compromise the quality of the data, which is critical for policymakers, economists, and financial markets.

Implications of Nonresponse Rates

High nonresponse rates may result in substantial revisions to job growth figures. For instance, the BLS reported an initial creation of 1.84 million jobs in a given year, only to later revise that number downward by approximately 370,000 jobs. Such discrepancies contribute to a perception of overestimated job growth, with research indicating that the BLS has historically overestimated job growth by an average of 5.6% annually, equating to around 9 million jobs.

Consequences for Economic Policy

The implications of these inaccuracies extend to monetary policy decisions made by the Federal Reserve. Fed Chair Jerome Powell acknowledged that the latest payroll numbers may be “artificially high,” indicating that the central bank’s decisions—such as interest rate adjustments—are based on potentially flawed data. This situation raises questions about the reliability of economic indicators and their use in shaping fiscal and monetary policies, emphasizing the need for improved data collection methods and strategies to enhance response rates.

In summary, the decline in survey response rates poses a significant challenge to the accuracy and reliability of employment data, which in turn affects economic policy and public perception of the labor market’s health.