WASHINGTON -- Department of Labor officials yesterday asked financial market participants to discount expected increases in unemployment rates during the first several months of next year because the rates will be distorted by changes in the way they are calculated.
Katharine Abraham, commissioner of the Bureau of Labor Statistics, gave an emphatic "yes," when asked if she hoped participants in the bond and other financial markets would ignore the reported unemployment rate for at least the first few months of next year. "We need to give it some time to settle down," she said during a news conference yesterday.
Abraham's comments came as agency officials spelled out details of how the Labor Department will revise its method of calculating the unemployment rate, which is known as the household survey. The changes will take effect with the January 1994 employment report that is due out in the first week of February.
The household survey has been used since the late 1940s and this is the first major overhaul since 1967, officials said. They acknowledged last week that the latest round of revisions will cause the reported unemployment rate to go up because the survey will classify more people as unemployed.
Agency officials bent over backward during yesterday's briefing to stress that the new survey is likely to yield distorted results initially. They also said rates derived from the new survey should never be compared to rates derived from the old survey because the measurement methods are so different.
"We're making it clear -- we have no idea what is going to happen in January," said John Bregger, assistant commissioner of the bureau.
Officials said the revised survey will ultimately yield a more accurate unemployment rate. But the initial results are likely to be distorted because new surveys generally tend to have implementation problems that take a few months to iron out, they said.
Also, the new unemployment rate reported each month will be based on seasonal adjustments derived from the old survey and it will take time to adjust the seasonal variations to the new survey, officials said. This will add to the initial distortion, they noted.
Thomas Plewes, associate commissioner of the bureau, said the government can begin "fine-tuning" seasonal adjustments after six months of using the new survey. But it will take a few years to completely adapt the seasonal adjustments to the new survey, Plewes said. Nonetheless, he predicted the revisions would not be major.
Under the new method, the household survey will continue using a sample of 60,000 U.S. households.
The department reported that a trial run of the new survey, conducted during the 12 months that ended in August and using a 12,000 household sample, yielded an average unemployment rate that was 0.5 points higher than the old survey.
But officials cautioned that they are not sure whether this difference will hold up over time or on a monthly basis because the sample size was much smaller, making it less reliable. They also said seasonal adjustments were not factored into the numbers because a year's worth of figures were compared.
Consequently, Abraham advised against merely subtracting a half percentage point from the unemployment rate of the new survey to estimate what the old survey would have yielded.
Specifically, the new survey will use a revised questionnaire designed to better mirror today's society, such as more women working outside the home. Officials said eliminating the "gender bias" in the old survey accounted for a majority of the upward gain in the unemployment rate.
The questionnaire was also changed to reflect the fact that people now use the word "layoff" to refer to a permanent loss of a job, officials said.
Officials also noted that the changes will have no effect on the method for calculating monthly nonfarm payrolls, which the financial markets watch more closely.
