Overall ‘Functional Unemployment’ Unchanged in July, Says Ludwig Institute

Meanwhile, percentage of Black, Hispanic workers in poverty-wage jobs remains high

August 14, 2024

For Immediate Release

WASHINGTON, D.C. — While overall functional unemployment remained unchanged in July, the labor market continues to be challenging for Black and Hispanic workers, with rising functional unemployment rates fluctuating at levels well above the overall average, according to the latest True Rate of Unemployment (TRU) by the Ludwig Institute for Shared Economic Prosperity (LISEP).

While the U.S. Bureau of Labor Statistics reported a slight increase in the unemployment rate in July — from 4.1% to 4.3% — LISEP's TRU provides a more comprehensive view of labor market conditions. By accounting for underemployment and other factors, TRU’s data suggests a worsening situation for low-income workers, according to LISEP Chairman Gene Ludwig.

“Our data consistently indicated a troubling labor market long before the recent uptick in the official unemployment rate,” Ludwig said. “When individuals are working for poverty wages, they are essentially ‘functionally unemployed.’ The current situation may represent a shift from underemployment to outright unemployment.”

The TRU measures the “functionally unemployed,” defined as the jobless plus those seeking, but unable to find, full-time employment paying above poverty wages ($25,000 a year in 2024 dollars) after adjusting for inflation. While July’s overall TRU remained unchanged at 24.5%, the labor market experience varied significantly across demographic groups. Black workers faced heightened challenges, with their TRU rising from 26.9% to 27.6%. Hispanic workers experienced an even-steeper increase of 1.2 percentage points, from 26.8% to 28%. In contrast, White workers saw an overall improvement, dropping from 23.8% to 23.1%.

The TRU for both men and women remained relatively unchanged, with the rate for men increasing 0.1 percentage points to 20.3% and the TRU for women dropping 0.2 percentage points, to 29.2%. Among education categories, those with advanced degrees continue to maintain the lowest TRU at 12.9%, a 0.8 percentage point improvement, but those with no high school diploma struggled with their July TRU climbing to 52.6%, 0.2 percentage points above its June level.

“Workers at the lower end of the earnings scale have always been the most vulnerable, even in the most robust economy; and here, we are seeing families continue to struggle. The truth is, they never fully recovered from the Great Recession in 2007,” Ludwig said. “We must stop using the stock market and broad, outdated economic indicators as the sole measure of our national economic health. They just don’t accurately reflect the reality for a majority of American households.”

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Correction: August 14, 2024
A previous version of this press release stated the TRU for workers without a high school diploma rose 0.1 percentage points. The TRU for workers without a high school diploma rose 0.2 percentage points.

Overall ‘Functional Unemployment’ Unchanged in July, Says Ludwig Institute

Meanwhile, percentage of Black, Hispanic workers in poverty-wage jobs remains high

‍Jim Gardner

August 14, 2024

For Immediate Release

Additional Resources

Historically, systemic barriers have disproportionately hampered Black farmers’ ability to retain land ownership.

Despite this tragic history, there is still time and economic incentive to set some of the inequities right.

In 2021, working mothers with children under 18 earned just 61.7 cents for every dollar a father made. Much wider than the overall gender wage gap, this difference highlights both the motherhood penalty and the fatherhood premium.

Female-dominated, low-paying, part-time occupations are overrepresented among informal workers who also have a formal job.

We need to create an economic environment where companies can hire these workers as employees and pay them a living wage. There are steps policymakers can take to change the gig economy dynamic.

Dependency on tips over base pay is growing because of actions taken by gig companies to institute tipping.

Even for those lucky enough to be making what amounts in many states to the poverty wage of $15 per hour, many will get nothing but a week’s notice before being out on the street.

One study shows that consistent involvement in extracurricular activities increased a child’s likelihood of attending college by a whopping 400% compared to not being involved at all.

Studies have found that both men and women are paid less if they work in “nurturant” occupations.

Since 2015, the correlation between LISEP’s functional employment to population ratio and the inflation rate was more than four times as strong as the BLS’s employment to population ratio, which is depicted in the graph below.

The employment to population ratio settles the discrepancy between what we see around us and what the data says.

The NBER paper defines employment using the traditional BLS U-3 rate. However, the often-used U-3 number fails to capture the quality of jobs.

Among states with stricter COVID-19 policies, reducing unemployment benefits had little to no effect. The average effect of increased employment seems to have occurred only in those states with looser COVID protocols.

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Press Contact:

‍Jim Gardner

press@lisep.org

(573) 680-1822

Additional Resources:

TRU Summary

TRU White Paper

TRU & TWE Source Data

TRU & TWE Methodology

About TRU

LISEP issued the white paper Measuring Better: Development of “True Rate of Unemployment” Data as the Basis for Social and Economic Policy upon announcing the new statistical measure in October 2020. The paper and methodology can be viewed here. LISEP issues TRU one to two weeks following the release of the BLS unemployment report, which occurs on the first Friday of each month. The TRU rate and supporting data are available on the LISEP website at lisep.org/tru.

About LISEP

The Ludwig Institute for Shared Economic Prosperity (LISEP) was created in 2019 by Gene Ludwig and his wife, Dr. Carol Ludwig. The mission of LISEP is to improve the economic well-being of middle- and lower-income Americans through research and education. LISEP’s original economic research includes new indicators for unemployment, earnings, and cost of living. These metrics aim to provide policymakers and the public with a more transparent view of the economic situation of all Americans, particularly low- and middle-income households, compared with misleading headline statistics. On X: @LISEP_org.

About Gene Ludwig

In addition to his role as LISEP chair, Gene Ludwig is founder of the Promontory family of companies and Canapi LLC, a financial technology venture fund. He is the founder and CEO of Ludwig Advisors, which counsels financial firms on critical matters. Ludwig is the former vice chairman and senior control officer of Bankers Trust New York Corp. and served as the U.S. Comptroller of the Currency from 1993 to 1998. He is also author of the book The Vanishing American Dream, which investigates the economic challenges facing low- and middle-income Americans. On Twitter: @geneludwig.

Please Note:

The Ludwig Institute for Shared Economic Prosperity continuously revises and updates its data. As a result, data presented in this release may no longer reflect the latest estimates. Find the most current data at lisep.org.