You're reading section 9(a) to say far more than it actually says. What section 9(a) is meant to do is keep individual Census responses confidential. Let's go over the full subsection:
(a) Neither the Secretary, nor any other officer or employee of the Department of Commerce or bureau or agency thereof, or local government census liaison, may, except as provided in section 8 or 16 or chapter 10 of this title or section 210 of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1998 or section 2(f) of the Census of Agriculture Act of 1997—
(1) use the information furnished under the provisions of this title for any purpose other than the statistical purposes for which it is supplied; or
(2) make any publication whereby the data furnished by any particular establishment or individual under this title can be identified; or
(3) permit anyone other than the sworn officers and employees of the Department or bureau or agency thereof to examine the individual reports.
This restricts employees of the Department of Commerce and local officials who help administer the Census. It says that the Census data can't be used for anything except gathering statistics, that the department can't publish statistics that are so fine-grained that they let you figure out the data for a particular individual or establishment (establishments are things like companies), and that only Commerce employees may view the individual reports. But compiling the information to report, say, how many people of a certain type live in each relatively small area is acceptable, because that's the statistical purpose for which the data is supplied. The data collected from all households in the decennial census is released down to the block level. For a sense of what that means, my house in the suburbs is in a census block that's less than 9 acres and had less than 25 people in less than 10 households as of the 2010 census.
The law continues:
No department, bureau, agency, officer, or employee of the Government, except the Secretary in carrying out the purposes of this title, shall require, for any reason, copies of census reports which have been retained by any such establishment or individual. Copies of census reports which have been so retained shall be immune from legal process, and shall not, without the consent of the individual or establishment concerned, be admitted as evidence or used for any purpose in any action, suit, or other judicial or administrative proceeding.
We've seen that other agencies can't get individual reports from the Commerce Department. This says they can't demand a copy from the person who filled it out either. Likewise, individual reports can't be used in any "action, suit, or other judicial or administrative proceeding." If push comes to shove, it's unlikely that something like personnel allocation would be considered a "proceeding." And in any event, this is only restricting individual reports retained by an individual or establishment. Data published by the Census Bureau is not an individual report retained by an individual or establishment.
Census data is routinely used for statistical purposes in trials. For instance, the Voting Rights Act forbids states from drawing districts to dilute minority votes. In enforcing this, the Justice Department needs to know the distribution of people of each race (not just how many are in each district, but how they're distributed within the district to help evaluate whether lines were drawn to split up clusters of minorities). It does this using census block data (districts tend to be drawn along census block lines), and that data can be used in court.
