September 'Functional Unemployment' Improves, Q3 Earnings Up, Says Ludwig Institute

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Ludwig Institute for Shared Economic Prosperity

Oct 17, 2024, 11:40 ET

Wages rise across the board, but living-wage jobs show uneven growth

WASHINGTON, Oct. 17, 2024 /PRNewswire/ -- Median weekly earnings jumped 1.9% for the third quarter of 2024 while the September rate of "functional unemployment" dropped by a half percentage point, with encouraging news for most demographic groups, according to a report by the Ludwig Institute for Shared Economic Prosperity (LISEP).

LISEP issued its monthly True Rate of Unemployment (TRU) for September along with the Q3 2024 True Weekly Earnings (TWE) report. TRU is a measure of 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). TWE is a measure of median weekly earnings (adjusted for inflation) for all members of the workforce, including part-time workers and the unemployed seeking work. By comparison, the Bureau of Labor Statistics headline numbers only include those who are employed at full-time jobs.

The overall TWE increased by 1.9% in Q3 from $964 to $982 a week. Women saw the strongest gains, increasing 3.3% from $849 to $877. This, combined with a more modest increase by men (0.6%, from $1,099 to $1,106 a week), narrowed the gender pay gap for women to 79.3 cents for every dollar earned by men. TWE for White workers increased by 3.1%, from $1,067 to $1,100 a week, while the TWE for Black workers increased by 1.2%, from $812 to $823. Hispanic workers' TWE, on the other hand, declined slightly, 0.1% from $791 to $790.

Weekly earnings increased across all earnings distributions. Low-wage workers at the 25th percentile saw a 2% gain, from $601 to $613. Those at the 75th percentile saw a 1.4% increase, from $1,613 to $1,635. The highest earners (90th percentile) saw the most significant growth with an increase of 3.6%, from $2,522 to $2,613 a week. Over the past year, wage growth has been uneven. While wages at the 25th percentile are 0.6% lower, they have increased at the median 0.3%), 75th percentile (1.9%), and 90th percentile (1.6%).

"Even though wages for full-time workers rose considerably year-over-year, the weaker labor market has meant that lower-wage workers have not experienced increases at the same level as higher-wage workers," said LISEP Chairman Gene Ludwig. "While any earnings increase is positive, it remains concerning that the larger increases have not come to those who need it the most."

The overall TRU also improved, falling from 24.4% to 23.9% on the gains for Black and White workers. Black workers saw a 1.5 percentage point decrease (from 26.7% to 25.2%), while the TRU for White workers fell 0.3 percentage points, from 23.2% to 22.9%. Hispanic workers, however, saw a rise in functional unemployment, with a TRU increasing 0.7 percentage points, from 27.5% to 28.2%.

Despite a Q3 improvement, the quarterly average TRU remains 0.8 percentage points higher than a year ago (24.3% vs. 23.5%), with all demographic groups experiencing elevated rates.

"Easing inflation and a resilient job market are positive signs for low- and middle-income workers," Ludwig said. "Rising wages and improving functional employment are encouraging indicators. Longer-term trends, however, indicate we still have some ground to make up to fully recover—but the current trajectory is promising."

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 TWE
LISEP issues the TWE quarterly following the release of the BLS Median Weekly Earnings report. The full white paper, "Understanding the Status of American Workers Through Analysis of Current Population Data," can be viewed here. The TWE rate and supporting data are available on the LISEP website at https://www.lisep.org/twe.

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 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 X (formerly Twitter): @geneludwig.

SOURCE Ludwig Institute for Shared Economic Prosperity