U.S. Admits Error of 25% on Job Losses : Economy: The Labor Department denies that the undercount is a political attempt to make the recession look less severe.

WASHINGTON — The U.S. Labor Department acknowledged Wednesday that the extent of job losses during the 1990-92 recession has been far greater than previously estimated, confirming the suspicions of California officials who began questioning the federal figures late last year.

Officials of the agency’s Bureau of Labor Statistics denied that their undercount was politically motivated in an effort to make the recession appear less severe. But they said they could not fully explain how they managed to underestimate job losses by more than 25%.

Correcting its earlier estimates, the agency said U.S. employers shed 2.16 million jobs between June, 1990, and February of this year after seasonal adjustments, far greater than the previous count of 1.57 million.

Officials said the revision will have no effect on the unemployment rate, now estimated at 7.2% nationally and 8.0% in California. The number of payroll jobs and the jobless rate are calculated from different sets of data.

Acting bureau Commissioner William G. Barron Jr. told reporters that there is “absolutely nothing that would support” an accusation that the government’s statistic-gathering process was tainted by politics.

But Democrats seized on the new figures as evidence that the economic slump was far worse than the Bush Administration has been willing to admit.

“Today’s figures should put to rest once and for all the myth that this recession was mild or shallow,” Sen. Paul S. Sarbanes (D-Md.), chairman of the Joint Economic Committee of Congress, said in a statement. “These figures more accurately represent what American workers have known all along--that this was a severe recession and a disaster for workers, who saw 2.2 million jobs disappear.”

Six months ago, the Labor Department cautioned that it expected to revise downward by about 650,000 its estimate of the number of jobs in the overall economy. The new estimate of job losses during the recession was released as part of that revision.

“We don’t feel the overall shape of the recession has changed,” Barron said.

Associate Commissioner Thomas Plewes noted that even when the revision is taken into account, the estimated 1.8% shrinkage in total employment between June, 1990, and February, 1992, shows that the recession has been less severe than the average downturn since World War II.

Some economists said the new figures help explain why consumer confidence last year fell to its lowest levels in a decade, even as the government’s economic statistics were picturing a relatively mild recession.

David Hensley, director of the UCLA Business Forecasting Project, said if Federal Reserve Board officials had received more accurate job-loss figures early last year, they might have cut interest rates more aggressively to promote a recovery.

“That was an opportunity that was lost,” Hensley said.

Bureau of Labor Statistics officials said the revision partly stemmed from a previous undercount of jobs lost at firms that have merged or gone into bankruptcy. Deborah Klein, associate commissioner for special studies at the agency, said the bureau also has recently improved its reporting procedures to eliminate double-counting of job totals at some firms.

“Some part (of the revision) is due to better reporting now, and some of it is due to a bigger job loss than we thought,” Klein said.

California officials began warning last fall that the federal government might have seriously underestimated the effect of the recession on the state and some other major regions by undercounting the nation’s job losses.

They said an analysis by the California Department of Finance of payroll tax filings in California, New York and other states indicated an extraordinary free fall in jobs in late 1990 and early 1991.

According to the latest update, California lost 523,000 jobs between June, 1990, and February, 1992, accounting for nearly one-quarter of the jobs lost across the country.

During 1991 alone, the state lost 333,000 jobs--six times more than originally reported.

The surprising state reports gained attention because they were based on statements filed quarterly by almost all private employers.

By contrast, the Labor Department’s widely quoted jobs data comes from smaller surveys that may not fully detect sudden, sharp swings in the economy for many months, economists said.

The California Employment Development Department said statewide losses in aerospace, high tech, heavy manufacturing and construction led the list. Nearly two-thirds of the total job losses have been in Los Angeles County.