(Bloomberg) -- The UK may delay by years the rollout of a new survey to provide a more reliable picture of who’s working and who’s not, deepening concern about key economic indicators the Bank of England relies on to set interest rates.
The full adoption of a “Transformed Labour Force Survey” might not come until mid-2027, the UK Statistics Authority has acknowledged in documents quietly released in recent months amid increasing frustration over the current monthly jobs data. The agency had previously hoped to implement the new survey and resolve the issue of declining response rates by this past September.
It’s the latest blow for BOE rate-setters, who need an accurate assessment of employment trends among Britain’s some 55.2 million people over the age of 16 to make monetary policy decisions. Criticism from central bankers, politicians and economists that depend on Office for National Statistics data has become sharper, with BOE Governor Andrew Bailey calling accurate statistics “integral” to judging the tightness of the labor market and its impact on inflation.
Members of Parliament pressed Bailey and other BOE policy-makers on their concerns during a hearing this week in London. Treasury Committee Chair Meg Hillier subsequently said in a letter to the ONS that she has “major concerns about the UK’s ability to set monetary and fiscal policy appropriately in the absence of reliable data about the labor market.”
Britain’s labor data woes are symptomatic of a global struggle by statisticians to reach the right people and get a big enough sample for economic indicators in the wake of the pandemic and wider societal shifts. The transformed version was supposed to fix the response rate problem and expand it by moving online.
However, the new survey has run into its own data collection issues. Lingering concerns about the new survey’s accuracy — as well as the potential need for radical solutions — were disclosed by the UK Statistics Authority, the ONS’s parent body. They also revealed that the government was discussing whether to make filling out surveys mandatory for households, a major step to ensure an accurate read of the jobs market.
Fresh doubts over the labor survey were raised on Wednesday when the Resolution Foundation think tank said the ONS had underestimated the number of people in employment by almost 1 million, potentially rewriting the narrative of the jobs market since the pandemic.
An ONS spokesperson said that it was testing a shorter version of the labor survey questionnaire with “early responses looking positive.” It plans to publish the findings and a timetable for the transition early next year.
“In line with many statistical agencies around the world we are fighting the challenge of falling response rates for household surveys,” they said. “Our long-term solution remains the online-first Transformed Labour Force Survey, which approaches many more people in different ways.”
The ONS is due to give an update on its progress transitioning to the transformed LFS on Dec 3.
While the BOE has increasingly turned to other surveys, Bailey has said there is no alternative measure of economic inactivity — a key area of concern in recent years. The problems have not affected crucial data on wage growth.
The ONS documents, which include meetings from June and July plus a response by the UK Statistics Authority to an external review, revealed:
- The need to gather enough back data could potentially delay full adoption of the new survey to as late as mid-2027.
- The quality of the data from the “online-first” transformed survey that will replace current estimates “remains a concern.”
- It is still struggling to reach enough young people in the new survey, a problem that beset the current estimates.
- The ONS is looking at options to improve responses to the new survey, such as halving its length.
- The current and transformed surveys were producing notably different results on headline labor indicators as the ONS tests its new version.
Estimates for the labor market have been beset by accuracy concerns since the ONS withdrew the current LFS in 2023 before later reinstating in February this year with a warning on its precision. Officials failed meet a target of September for introducing the transformed version.
“I would hope it would be before 2027 and certainly that we would have more and better information in the public domain before then,” said Jonathan Portes, who chairs the Stakeholder Advisory Panel on Labour Market Statistics — an external panel that advises the ONS.
“The existing LFS is getting better,” he said. “We still think that the new survey will be better, but some of the worst problems of what’s happening now are already in the process of being resolved, so it’s not a question of we’re flying blind.”
A barrage of criticism over the survey’s problems has only intensified in recent weeks. Chief Economist Huw Pill criticized the ONS’s efforts to overhaul the survey in a blistering letter sent to the agency in May.
“In our view, they have not yet led to an improvement and it remains uncertain whether the credibility of labor force statistics will improve,” Pill wrote, the Financial Times reported last month. He added that “response rates remain extraordinarily low.”
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