‘Functional Unemployment’ Jumps Nearly Half Percentage Point in May, Says Ludwig Institute

June 20, 2024

For Immediate Release

WASHINGTON, D.C. — Lower-income workers took a hit in May, with the overall “functional unemployment” rate climbing by nearly a half percentage point and a spike in the True Rate of Unemployment (TRU) for Black workers, according to the latest TRU report by the Ludwig Institute for Shared Economic Prosperity (LISEP).

The TRU measures the “functionally unemployed,” defined as the jobless plus those seeking, but unable to find, full-time employment paying above poverty wages (pegged at $25,000 a year in 2024 dollars) after adjusting for inflation. May’s overall TRU increased from 24.2% to 24.6%, a 0.4 percentage point increase, with Black workers experiencing an even higher increase: the TRU for Black workers jumped 2.4 percentage points, from 25.7% to 28.1%. By contrast, the official unemployment rate as reported by the U.S. Bureau of Labor Statistics increased a negligible 0.1 percentage points, from 3.9% to 4.0%.

“Even with cooling inflation, workers in lower-wage jobs are still fighting for economic survival,” said LISEP Chairman Gene Ludwig. “And while headline statistics still indicate a robust economy, this month’s TRU seems to better reflect the challenges everyday Americans are experiencing.”

Functional unemployment was also up for Hispanic workers, with the TRU climbing 0.2 percentage points, from 28.7% to 28.9%. And while the rate for White workers improved, dropping from 22.9% to 22.7%, LISEP notes that this can be attributed to functionally unemployed workers leaving the workforce. LISEP reported that the overall increase in TRU reflects a weakening labor market, which was accompanied by a 0.2 point decrease in the labor participation rate.

The TRU for women in the workforce approached 30%, rising by half a percentage point to 29.9%. The TRU for male workers also increased, climbing 0.8 percentage points to 19.9%.

“Soaring functional unemployment among women, Black, and Hispanic workers — with the TRU nearing 30% for these groups — is a wake-up call for policymakers,” Ludwig said. “We need solutions that address the lived experiences of these communities, not policies based on misleading headline statistics.”.

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‘Functional Unemployment’ Jumps Nearly Half Percentage Point in May, Says Ludwig Institute

‍Jim Gardner

June 20, 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.

The TRU for women in the workforce approached 30%, rising by half a percentage point to 29.9%. The TRU for male workers also increased, climbing 0.8 percentage points to 19.9%.

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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.