The text of 5 USC 552a (b)(7) is:
(b)Conditions of Disclosure.—No agency shall disclose any record which is contained in a system of records by any means of communication to any person, or to another agency, except pursuant to a written request by, or with the prior written consent of, the individual to whom the record pertains, unless disclosure of the record would be—
(7) to another agency or to an instrumentality of any governmental jurisdiction within or under the control of the United States for a civil or criminal law enforcement activity if the activity is authorized by law, and if the head of the agency or instrumentality has made a written request to the agency which maintains the record specifying the particular portion desired and the law enforcement activity for which the record is sought;
Note the phrasing: "No agency shall... unless...". It isn't saying that a disclosure to law enforcement is always legal. It's saying that such a disclosure doesn't violate this particular provision of law.
However, such a disclosure would violate a different provision, namely 13 USC 9:
(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.
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.
There are no exceptions here for law enforcement.
Another relevant principle here is generalia specialibus non derogant. The Privacy Act rules apply to government records in general, but Title 13 applies to census records in particular, so the latter prevails.