Coronavirus muddies US economic data as business closures push down response rates
WASHINGTON: A near total closure of US businesses as authorities try to control the spread of the novel coronavirus could make US economic data unreliable in the coming months and harder to get a clearer picture of the severity of the recession caused by the virus.
Government agencies such as the Labor Department’s Bureau of Labor Statistics (BLS) and the Commerce Department’s Census Bureau and the Bureau of Economic Analysis (BEA) compile data, including the closely watched employment report, by collecting information from businesses and households through in-person and telephone interviews.
Investors, policymakers and businesses rely on economic data to make critical decisions. The coronavirus’ impact on data collection was already felt in March’s employment report, with decreases in response rates.
With at least 90 per cent of Americans now under some form of a lockdown to curb the spread of COVID-19, the respiratory illness caused by the coronavirus, economists say data collection will be severely constrained.
“This won’t necessarily bias the numbers stronger or weaker but it will add considerable sampling error to those numbers,” said Michael Feroli, an economist at Jpmorgan in New York.
“Given the inherently backward-looking nature of economic data, economic policymaking is often compared to driving by looking in the rearview mirror. In coming weeks that mirror will be exceptionally foggy but we can be fairly certain that we are driving into a wall.”
According the BLS, the response rate for the household survey, from which the unemployment rate is calculated, had a 73 per cent response rate in March, down about 10 percentage points in recent months.
The survey of establishments from which nonfarm payrolls are derived had a collection rate of 66 per cent last month. That was about nine percentage points lower than average.