Unsafe: 1 Likely to cause severe data loss even in case of the smallest corruption (a single bit flip). 2 Likely to produce false negatives.
It does seem like xz is somewhat overengineered, but I don't think that's a characteristic unique to it; any other algorithm with similar compression performance will yield similar behaviour on corrupted data, since the whole point and why compression works is to remove redundancy. I say use something like Reed-Solomon on the compressed data, thus introducing a little redundancy, if you really want error correction.