Update on Statistics: Synchronizing Data Is Key to More Accurate Measures of Economy

By Maurine Haver
Chair, NABE Statistics Committee
President, Haver Analytics

The quality of our economic statistics has always been a concern of NABE members and our dynamic economy continues to pose greater and greater measurement challenges while the resources available to meet those challenges have not kept pace.  The gaps in coverage of the financial services industry were especially evident during the recent financial crisis, but this is just one of many other areas where we lack important data. 

While advocating for increased spending on economic statistics will always be an important part of the NABE agenda, it is also imperative that we look for other opportunities to improve our system.  One such opportunity is the sharing of business data among our major three statistical agencies—the Census Bureau, the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA).  Several studies over the past ten years have demonstrated that data sharing can improve the accuracy of key economic indicators without increasing either resources or respondent burden. In fact, it may be possible that burden could actually be reduced.

Thanks to the many letters and calls from NABE members, we were able to pass the Confidential Information Protection and Statistical Efficiency Act of 2002 (CIPSEA).   This legislation laid the groundwork for the sharing of statistical information by creating a uniform standard across agencies that assured the confidentiality of information collected by them for statistical purposes.  It also made possible the sharing of some business data among the Census Bureau, the BLS and the BEA.    We have seen important outcomes from this legislation, including the expansion of industry coverage of the BEA multinational corporation data from 200 industries to 1,000.  Significant data errors and omissions in the collection of spending on research and development were also uncovered once the BEA and Census Bureau were able to compare their micro data. 

Next Steps Needed to Harmonize Business Lists

Unfortunately, some of the benefits of data sharing that we envisioned in 2002 have not been realized because data collected by the Internal Revenue Service that is used by the Census Bureau cannot be shared with the BLS and BEA without changes in the tax code.   As a consequence, the BLS and Census business lists that are used to draw samples are still not harmonized.  Studies have shown that over 30 percent of single-establishment businesses have different NAICS [North American Industrial Classification System] industry code assignments in the two lists and 15 percent actually differ at the sector level, i.e. a manufacturing establishment on the Census list might be classified as wholesale trade on the BLS list. In a presentation at an Association of Public Data Users conference last fall, Adrienne Pilot, director of the Council of Economic Advisers’ Statistical Office, pointed out that 2002 growth of real value added in information technology  (subsector 334) was reported to be 7.4 percent by the BLS and 15.6 percent by the Census Bureau.

The problems created because our data are not synchronized are particularly evident in our national accounts.  The statistical discrepancy would most certainly be reduced if Census-based gross domestic product (GDP) by industry and BLS-based gross domestic income (GDI) by industry were synchronized.  Business income is also getting less precise.  BEA is forced to do more imputations as more business income comes from LLCs, partnerships and other unincorporated entities, while BEA only has access to traditional corporation tax data. 

There is no question that substantial improvements in accuracy, reliability, and efficiency can be achieved across our national, regional, and industry data if Census, BLS and BEA could compare figures and make adjustments as needed.  These improvements have important implications for monetary policy, state and local budgets, and business decisionmaking. 

After years of careful planning and negotiation, we expect that a bill will be moved forward this year to make small changes in the tax code that will permit the agencies to work toward data synchronization.  Like in 2002, your support will be crucial to getting it passed.  The views of constituents are the most important to those in Congress, even when it comes to legislation such as this that will increase the efficiency and quality of our system.  Watch the NABE NewsDigest for progress reports.  And it is never too early to begin the process of educating your congressional representatives about the importance of quality economic data to your job and business.  If they don’t hear from us, they won’t know there are problems that don’t necessarily need more dollars to be fixed.

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