Declining Response Rates for Federal Surveys Could Impact the Accuracy of Economic Data
Inflation, jobs, and home prices are all significant indicators of the health of the economy, and important data used by the Federal Reserve to make decisions. However, recent reports have shown that the response rates for surveys collecting this crucial economic data have been on the decline.
Surveys tracking the consumer price index have seen a sharp drop in response rates, falling from 67% in 2016 to 53% this year, while the response rate for surveys tracking job openings tumbled from 66% to 31%. These declining response rates are worrying for markets that rely heavily on accurate economic data to anticipate the Federal Reserve’s next move.
Former Fed economist Claudia Sahm expressed concerns about the declining response rates, stating that the accuracy of the estimates may be compromised, leading to market volatility based on unreliable data.
The quality of the data is particularly critical at this time, as the Fed is approaching a pivotal point: shifting from rate hikes to cuts. Falling response rates can increase uncertainty about the economy and lead to larger-than-usual data revisions, according to a report by Goldman Sachs.
Despite the decline in response rates, government statistics are still considered the gold standard of data due to the large sample sizes used in federal surveys. Gerald Perrins, an official overseeing consumer price data at the Bureau of Labor Statistics, highlighted the bureau’s efforts to maintain the quality of the data by expanding sample sizes and reaching out to more respondents.
While the decline in response rates is certainly a cause for concern, efforts are being made to ensure that the accuracy of economic data remains intact. As markets continue to rely on this data, it is essential to address the challenges posed by declining response rates to maintain the reliability of economic indicators.
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