Estimates of the errors in classification in the Labour Force Survey and their effect on the reported unemployment rate - ARCHIVED

This paper studies response errors in the Current Population Survey of the U.S. Bureau of the Census and assesses their impact on the unemployment rates published by the Bureau of Labour Statistics. The measurement of these error rates is obtained from reinterview data, using an extension of the Hui and Walter (1980) procedure for the evaluation of diagnostic tests. Unlike prior studies which assumed that the reconciled reinterview yields the true status, the method estimates the error rates in both interviews. Using these estimated error rates, we show that the misclassification in the original survey creates a cyclical effect on the reported estimated unemployment rates. In particular, the degress of underestimation increases when true unemployment is high. As there was insufficient data to distinguish between a model assuming that the misclassification rates are the same throughout the business cycle, and one that allows the error rates to differ in periods of low, moderate and high unemployment, our findings should be regarded as preliminary. Nonetheless, they indicated that the relationship between the models used to assess the accuracy of diagnostic tests, and those measuring misclassification rates of survey data, deserves further study.