‘Functional Unemployment’ Rate Shows No Improvement, Says Ludwig Institute

Living-wage job prospects mixed across demographic categories

November 14, 2024

For Immediate Release

WASHINGTON, D.C. — The U.S. “functional unemployment” rate saw a slight uptick in October, rising 0.1 percentage points, according to the latest True Rate of Unemployment (TRU) by the Ludwig Institute for Shared Economic Prosperity (LISEP).

The TRU—a measure of 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—rose in October from 23.9% to 24%. Similarly, the official unemployment rate issued by the U.S. Bureau of Labor Statistics (BLS) remained unchanged at 4.1%. While the overall TRU rose, White workers saw an improvement, with their TRU decreasing by 0.4 points to 22.5%.

Hispanic workers also posted some gains in October, with a TRU dropping from 28.2% to 27.9%. But the rate of the total Hispanic population without functional employment, as measured by the True Rate of Unemployment Out of the Population (TRU OOP), is higher than last month (51.7% vs. 51.1%) due to a lower labor force participation rate—which appears to be a result of low-wage earners leaving the workforce. Black workers saw their TRU rise 1.7 percentage points, from 25.2 to 26.9%.

“Recent events, such as the hurricanes in the southeast U.S. and the Boeing strike, certainly had an impact on the labor market in October, albeit temporarily,” said LISEP Chairman Gene Ludwig. “However, the underlying trend remains: nearly one-quarter of American workers find themselves working for poverty-level wages.”

During the same period, the TRU for men increased 0.4 percentage points, from 19.5% to 19.9%, while the rate for women improved, dropping 0.2 percentage points. And while this represents a slight closing of the gender gap, the TRU for women remains considerably higher at 28.8%.

“Even though major headline economic indicators point to a strong economy that is gaining steam, the data show this is not the reality for a majority of Americans,” Ludwig said. “Without thoughtful economic policy addressing the challenges facing middle-and lower-income families, we will continue to see unrest and dissatisfaction with the status quo.”

‘Functional Unemployment’ Rate Shows No Improvement, Says Ludwig Institute

Living-wage job prospects mixed across demographic categories

‍Jim Gardner

November 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.

Press Contact:

‍Jim Gardner

press@lisep.org

(573) 680-1822

Additional Resources:

TRU White Paper

TRU & TWE Methodology

TRU & TWE Source Data

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.