ECONOMY WATCH : Statistical Yo-yo

The Labor Department’s acknowledgment of an undercount in job losses confirmed the worst suspicions of California officials, who had been questioning the federal data since last fall. The agency underestimated job losses during the recession by more than 25%, but it is unable to fully explain how that happened.

So that leaves grave questions about the way data is collected. And if the data is not accurate, then the possibility of misreadings on the state of the economy are likely. What is clear is that the federal statistical base is not providing crucial, timely data.

California officials began warning last fall that payroll tax filings in California, New York and elsewhere were indicating an extraordinary free fall in jobs in late 1990 and early 1991 that was not being picked up in the federal job loss numbers, which are based on employer surveys.

Indeed, the Labor Department’s latest revisions showed job losses at a seasonally adjusted 2.16 million between June of 1990 and February of this year, which was far greater than the previous count of 1.57 million.

Some economists say the new data helps to explain why consumer confidence, which plummeted last year to its lowest level in more than decade, seemed so at odds with the economic profile painted by government statistics. Some even maintain that more accurate federal data might have helped the Federal Reserve Board move earlier to cut interest rates.

The federal statistical base needs help and a bigger budget to update the system. Now is the time to provide both.