'Functional Unemployment' Makes Biggest Jump Since Start of Pandemic
Black, Hispanic workers hit hardest with fewer living-wage jobs, according to Ludwig Institute
WASHINGTON, Nov. 21, 2022 /PRNewswire/ -- The rising cost of living continues to take a toll on working families, with a growing percentage of American workers unable to find a living-wage job or their current job fails to boost them over the poverty line after adjusting for inflation, according to the monthly True Rate of Unemployment (TRU) report by the Ludwig Institute for Shared Economic Prosperity (LISEP).
The TRU for the month of October topped 23.6%, a 1.3 percentage point increase over the previous month. This is the biggest month-over-month increase since the beginning of the pandemic in April 2020, and an indication that low- and middle-income workers are having a tougher time just to cover basic necessities, according to LISEP Chair Gene Ludwig.
"Until the last quarter, this administration has been doing well raising living standards for many middle- and lower-income Americans. However, both inflation and the Fed's response to it – a precipitous rise in interest rates – are taking a big bite out of this progress. American families are hurting due to a combination of higher prices and wages failing to keep up," Ludwig said. "Policymakers from both sides of the aisle would be well served to take heed and implement proactive policies creating good-paying jobs capable of supporting a family, and at a bare minimum, cover basic needs and provide for a reasonable quality of life."
TRU tracks the "functionally unemployed," defined by LISEP as the jobless, plus those seeking but unable to secure full-time employment paying above the poverty line after adjusting for inflation. LISEP's TRU is in stark contrast to the official government unemployment rate issued by the U.S. Bureau of Labor Statistics (BLS), which reported a more modest ncrease of 0.2 percentage points from September to October, from 3.5% to 3.7%.
LISEP reports that functional unemployment increased for all major demographics, with Black workers experiencing the largest increase of 3.4 percentage points, from 24.8% to 28.2%. Functional unemployment for Hispanic workers increased 2.4 percentage points, from 23.5% to 25.9%, with the TRU for White workers increasing 0.75 percentage points, from 21.8% to 22.5%. The TRU for men jumped 1.9 percentage points (17.2% to 19.1%), while the TRU for women increased 0.4 percentage points, from 28.1% to 28.5%.
Ludwig notes that a rising TRU can spell particularly bad news for low- and middle-income workers when one considers that the Consumer Price Index (CPI) is understating the impact of inflation on middle- and lower-income households. Last week, LISEP released data supporting its True Living Cost (TLC) Index, a measure of the effect of rising prices on the ability of families to pay for minimum adequate needs in seven categories: food, housing, healthcare, transportation, basic technology, childcare, and apparel/personal care. LISEP found that from 2020 to 2021, the price of necessities has increased 5.8% versus the CPI's 4.7%. And from 2001 to 2021 the TLC rose 50% faster than the CPI, 78.8% versus the 54.4% reported by the CPI.
"If we are to address the kitchen table issues most important to American families, it must begin with addressing how we measure the economy – one size does not fit all," Ludwig said. "The sooner we understand the dire and very real challenges facing middle- and lower-income households, the sooner we can work together for meaningful, sustainable solutions."
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.
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 Twitter: @geneludwig.
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SOURCE Ludwig Institute for Shared Economic Prosperity
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