By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — The government could release the weekly jobless-claims report directly to the public and eventually do the same with other sensitive U.S. economic data under a recommendation by a top Labor Department official.
In a new report, the department’s inspector general called the decades-old process for distributing the jobless claims report to media organizations flawed. The report suggests that Labor further tighten so-called lockup procedures for reporters or eliminate them entirely, publishing the report directly to the Internet instead.
Such a shift could have a big impact on how investors react to U.S. economic data, though just how much is unclear. These reports are released weekly, monthly or quarterly and often move markets by spurring investors to buy and sell stocks, bonds and other assets en masse.
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Under the current practice, reporters of large media organizations including MarketWatch participate in so-called lockups in which they are given an early preview of economic data, usually 30 to 60 minutes. Reporters are allowed to ask questions and write their articles, but they cannot file electronically until the economic reports are released to the public.
The goal of lockups, originally put in place in the mid-1980s, was to give the media time to sift through complex economic data such as monthly employment or gross domestic product and report them as accurately as possible. In some cases, media members have spotted errors in the government data that officials were able to correct before the news was disseminated.
Yet some government officials chafe at the gatekeeping role played by media organizations and believe it would be fairer to publish jobless claims — and other economic reports — directly to the Internet. They are likely to face resistance from Dow Jones, owner of MarketWatch, Bloomberg, Reuters, Associated Press and other media companies.
Government officials also hope to thwart high-speed traders who have set up systems to receive economic reports from news organizations a fraction of a second or more before the general public. These traders are viewed as receiving an unfair advantage that allows them to reap greater profits.
The current system of lockups “unintentionally creates an unfair competitive advantage for certain news organizations and their clients,” the inspector general report said. Read IG report here.
Eric Seleznow, an acting assistant secretary in the Labor Department, said the agency would review the IG’s findings and agreed that the use of lockups should be evaluated. Yet Seleznow also said “careful study” is required before any change is made to a process used to “promote accurate reporting of economic data.”
Although the report mainly focuses on weekly claims, the inspector general also said other government agencies should reconsider the use of lockups to publish important economic news.
Already, the Labor Department has taken a number of steps to improve its process. The agency rebuilt the room used for media lockups, tightened security and kicked out some new organizations. Reporters now have to pass through several metal detectors and they are no longer allowed to bring anything into the room.
Government investigators stepped up their scrutiny of the lockup process several years ago after a few news organizations inadvertently broke embargoes designed to prevent the early release of data. Investigators have looked closely at whether some traders illegally received information but so far have not found any evidence of misbehavior.
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