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

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Ludwig Institute for Shared Economic Prosperity

Jun 20, 2024, 10:31 ET

Percentage of Black workers in poverty-wage jobs climbs, reversing previous improvements

WASHINGTON, June 20, 2024 /PRNewswire/ -- 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."."

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 (formerly Twitter): @geneludwig.

SOURCE Ludwig Institute for Shared Economic Prosperity