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March 30, 2012

Historical Echoes: How the BLS Measured Up

Amy Farber* and Andrew Haughwout

The measurement of employment and unemployment in the United States has a long history—longer, in fact, than that of other measures of economic activity. The U.S. Bureau of Labor Statistics (BLS) was established in 1884, twenty-five years before the creation of national income accounting and the measurement of GDP.

The BLS’s centennial history, “The First Hundred Years of the Bureau of Labor Statistics,” published in 1985, describes the congressional debate surrounding the bureau’s establishment. Congressional opponents objected to the government’s apparent “disposition to pry into the affairs of the people,” while the New York Times opined that the proposed new agency was “a fine bit of Congressional witlessness.” Representative James H. Hopkins of Pennsylvania, however, argued that “[a] great deal of public attention in and out of Congress has been given to the American hog and the American steer. I submit, Mr. Chairman, that it is time to give more attention to the American man.” When the legislation passed, the new BLS was tasked with “collect[ing] information upon the subject of labor, its relation to capital, the hours of labor and the earnings of laboring men and women, and the means of promoting their material, social, intellectual and moral prosperity.”

While today the unemployment rate is among the most closely followed economic statistics that the government produces, it was many years before the BLS began to conduct comprehensive studies of unemployment. In 1914, BLS Commissioner Royal Meeker declared, “We have not anything that is worth the paper it is written on on the question of unemployment in this country, and, my heavens, it is up to this Bureau . . . to find out the facts.” Nonetheless, absent congressional support, the BLS continued to focus its efforts mainly on employment rather than unemployment.

Measuring employment, however, provided limited insight into unemployment. In a notable exchange (reported on page 128 of the BLS centennial history), Labor Secretary James J. Davis reported in 1928 that 1.9 million Americans were unemployed, basing his estimate on the “shrinkage of employment.” This figure came under criticism by Senator Robert F. Wagner, among others, who claimed the number was “three times as large.” Finally, in 1930, Congress authorized the Department of Labor (which then, as now, housed the BLS) to collect unemployment statistics. This authorization came just in time, as unemployment was about to become a preeminent national problem during the Great Depression. In 1933, the unemployment rate was close to 25 percent, a level not approached since, as this information-packed timeline shows.

The Wagner-Davis debate over how to count the unemployed has continued to the present day. As a result, many changes in the measurement of unemployment have been undertaken, as exemplified in this BLS discussion paper. This video by Salman Khan explains the issues in a very straightforward way, while Abbott and Costello take a somewhat more circuitous route to make the point.

Finally, in a post about the BLS, we would be remiss if we failed to mention that our own Erica Groshen, until recently an editor of Liberty Street Economics, has been nominated by President Obama to be the next Commissioner of Labor Statistics. Congratulations and good luck, Erica!

*Amy Farber is a research librarian in the Research and Statistics Group.

The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.

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