While headline unemployment may be stable, an increasing number of Americans are experiencing what is referred to as “functional unemployment,” a term that highlights the deeper issues facing America’s workforce.
According to the Ludwig Institute for Shared Economic Prosperity (LISEP), 24.3 percent of the country now find themselves “functionally unemployed,” defined as “the jobless plus those seeking, but unable to find, full-time employment and those in poverty-wage jobs.”
This is up from 24.2 percent in April, but down from 24.7 percent at the same time last year.
Why It Matters
While topline employment figures remain among the most commonly consulted labor indicators, LISEP’s metric captures other elements that factor into the overall health of the U.S. labor market. In doing so, the think tank argues, it can reveal overlooked issues while providing policymakers with “more accurate measure of Americans’ financial well-being.”
What To Know
According to the Bureau of Labor Statistics (BLS), the unemployment rate held steady at 4.2 percent for the second consecutive month in May and has remained above 4 percent since May of last year. The economy also added 139,000 jobs over the month, slightly behind the average monthly gain of 149,000 over the past year.
LISEP’s report, released days later, factored in the official figures alongside the share of the labor force that is seeking but unable to secure full-time employment, as well as those earning below a living wage, measured as $25,000 before taxes.
While the resulting figure for the True Rate of Unemployment (TRU) has been steadily improving in recent years, LISEP notes that there remain significant disparities along the lines of gender and race.
The percentage of functionally unemployed White Americans (23.6 percent) sits well below the rate for the Black and Hispanic population: 26.7 percent and 27.3 percent, respectively. Additionally, 29.9 percent of women are now in this category, compared to 19.3 percent of men.
LISEP’s estimate that 24.3 percent of the working population finds itself functionally unemployed would equate to over 66 million Americans, based on the population included in BLS calculations.
However, some experts are skeptical of the need for LISEP’s unique metric, given the availability of the incorporated data. Labor economist David Card noted that the BLS already publishes several alternatives to the headline unemployment figures, including its “alternative measures of labor underutilization,” which includes part-time workers who are seeking full-time work.
“That is a long-standing series that many people look at. It has risen more over the past year than the standard unemployment rate,” he told Newsweek. “I am not so convinced that adding all the other groups is helpful, other than as a rhetorical device.”
What People Are Saying
LISEP Chair Gene Ludwig, in a June 18 press release: “Over the past four months, we’ve seen a stagnation in job opportunities that pay above poverty wages, particularly for low- and middle-income workers. As economic uncertainty grows, more Americans are losing ground. Wages aren’t keeping up with the rising cost of living, and the shrinking availability of living-wage jobs is compounding the strain. The consequences for working families are becoming increasingly severe.”
“The TRU, and its stark contrast with government headline statistics, tells us American workers are facing greater challenges than what we are led to believe,” he added.
David Card, professor of economics at the University of California, Berkeley, told Newsweek: “It is useful to keep track of poverty rates and various measures of unemployment and lots of other indicators. Whether they should be combined in a single index is unclear.”
Josh Bivens, Chief Economist at the American Enterprise Institute, told Newsweek: “The problem of low pay in the U.S. is real and important, but it’s not a new feature of the economy and it’s not been hidden. And the last five years have seen this problem get substantially better. Low-pay indicators have dropped faster in that time than in any time in the past 40 years.”
“Compared to historic norms, the incredibly strong economy handed off to the Trump administration persists for now. Soon it might not,” he added. “The signs of that will be rising unemployment, involuntary part-timism, and falling wages for low-wage workers.”
What Happens Next
The U.S. labor market and broader economy face a mixed outlook in the coming months, primarily due to the administration’s trade policies and their potential impact
Last week, Federal Reserve Chair Jerome Powell said that the U.S. economy was “in solid shape,” but warned of “very high uncertainty” due to the impact of tariffs.
“Everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs,” Powell said, “because someone has to pay for the tariffs.”
The post America Warned of Millions Who Are ‘Functionally Unemployed’ appeared first on Newsweek.
