US jobs data may be miscounting millions of 'gig' workers

FE Team | Published: November 18, 2023 22:00:17

BOSTON, Nov 18 (Reuters): Millions of "gig" workers may get missed every month in the US government's employment report, a discrepancy with implications for how Federal Reserve officials size up the job market and any associated inflation risks.
Research prepared for a Boston Federal Reserve labor market conference found that whether driving for Uber to make ends meet or taking piecework jobs in retirement, casual contract workers sometimes don't consider themselves "employed" or even a part of the labor force.
As a result, they answer government survey questions in a way that may produce a significant undercount of those working, economists Anat Bracha, an associate professor at the Hebrew University Business School in Jerusalem, and senior Boston Fed economist Mary A. Burke concluded in a research paper to be presented at the conference on Friday.
The number could be just a few hundred thousand under the most constrained estimates or as many as 13 million, involving a swing of perhaps 5 per centage points in the share of the adult population that is working at least part-time, a figure the US central bank watches closely.
Though that indicates the labor market at any time may be "tighter" than thought, the researchers said they felt it means the economy actually has more room to increase work and production without generating inflation - a case for the Fed to give the job market more room to run.
Particularly in the years before the coronavirus pandemic "inflation was not accelerating ... despite the substantial amount of hidden informal work that we document," Bracha and Burke wrote. As a result, "the benchmark for full employment could simply be adjusted upward."
The research involved reexamining the detailed responses to a New York Fed survey of "informal work" from 2015 through 2022.
In comparing parts of that questionnaire covering work obtained via online platforms or contract jobs with another section structured more like the Labor Department's monthly survey of employment status, they found the responses often didn't track. That left potentially millions slipping through a statistical crack.
It is a significant data gap for economists who, over the last decade, have debated, rehashed, challenged and revised the longstanding idea that inflation is often driven by low unemployment and the rising wages and spending that follow from it.
The jobless rate, as Bracha and Burke noted, continued falling throughout the 2010s without higher inflation, a fact that prompted the Fed to rethink its approach to monetary policy and not assume that inflation would rise once the unemployment rate got too low. Lately, inflation has been declining without a dramatic rise in the unemployment rate.
US central bank officials, significantly including Fed Chair Jerome Powell, still see a connection between the jobless rate and inflation and feel there will need to be increased labor market "slack" for inflation to remain under control.
As of early 2013, the bulk of Fed officials thought the "longer-run" unemployment rate, a proxy for the level of joblessness consistent with the central bank's 2 per cent inflation target, was between 5.0 per cent and 6.0 per cent. In projections issued in September, Fed officials saw it between 3.5 per cent and 4.3 per cent, a dramatic shift.