'Functional Unemployment' at Highest Level Since 2021, Says Ludwig Institute

WASHINGTON, March 20, 2024 /7Newswire — Even though the job market expanded in February, a smaller percentage of those positions are paying a living wage — resulting in the highest “functional unemployment” rate in two-and-a-half years, according to the monthly True Rate of Unemployment (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 the poverty line (pegged at $25,000 a year in 2024 dollars). The February TRU jumped 1.6 percentage points, from 23.3% to 24.9% — the highest level since July 2021. By contrast, the official unemployment rate issued by the U.S. Bureau of Labor Statistics increased only marginally, from 3.7% to 3.9%.

This is one of the largest month-over-month TRU increases since 1995, the earliest year LISEP has data. LISEP researchers surmise that a combination of rising consumer prices, coupled with a concentration of job growth in low-wage occupations, contributed to the spike in functional unemployment.

“Despite glimmers of hope in the economy, the harsh reality is that far too many Americans and their families are still locked in a struggle to make ends meet,” said LISEP Chairman Gene Ludwig. “The February TRU report serves as a stark reminder: having a job simply is not enough anymore. We need a shift toward dependable, stable, good-paying jobs that empower families to achieve and maintain a reasonable standard of living.”

While functional unemployment is up for all major demographic groups, Black, Hispanic, and female workers saw the largest increases. The TRU increased 1.5 percentage points for both Black and Hispanic workers, now 27.7% and 29.3%, respectively. The TRU for White workers was up 1 percentage point, from 21.7% to 22.7%. Both Black and White workers are seeing their highest TRU since October 2022.

For Black and Hispanic workers, the higher TRU seems to be driven in part by a higher labor force participation rate, suggesting that many new workers were unable to secure living-wage jobs, according to LISEP.

Meanwhile, the living-wage gender gap widens further. The TRU for women in the workforce jumped 2 percentage points, reaching 30%. The TRU for men increased 1 percentage point, to 20.2% — creating a gender gap of nearly 10 percentage points. This marks the highest TRU for women since August 2021 and for men since September 2021.

“Headline economic statistics paint an incomplete picture — often bordering on fiction — for   middle- and working-class families,” Ludwig said. “Policymakers must acknowledge this disparity, particularly that not everyone shares equally in recent economic gains. Their focus should shift toward creating opportunities for those who need them the most — and that begins with the availability of living-wage jobs.”

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 https://www.lisep.org/tru.

About LISEP
The Ludwig Institute for Shared Economic Prosperity (LISEP) was created in 2019 by 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.

About Gene Ludwig
In addition to his role as LISEP chair, Gene Ludwig is a managing partner of 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 also the founder of the Promontory family of companies. He 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 X (formerlyTwitter): @geneludwig.

SOURCE Ludwig Institute for Shared Economic Prosperity