Is unemployment in America near historic lows, or are there underlying issues of concern? The official rate says the labor market is doing pretty well, but the Ludwig Institute for Shared Economic Prosperity says nearly a quarter of workers are "functionally unemployed." That’s kind of like checking your bank account and deciding you’re rich because you still have eight bucks left.
Here are Five Fast Facts on functional unemployment:
- 🤔 Define The Term - The Ludwig Institute’s measure includes people who are unemployed and looking for work, as well as those who are involuntarily working just part-time and earning poverty level wages (less than $26k a year before taxes). 😥
- 📉 Officially Official - The official US unemployment rate was 4.1% in July, which most economists view as healthy. Sadly, your landlord, grocery store, and electric company have yet to accept a suggestion of "health" as a payment method.
- 📈 Unofficially Unofficial - Functional unemployment, on the other hand, reached a whopping 24.9% in July, the fourth straight month of increases. So...depending on the measuring stick, the job market is either pretty healthy or needs to lie down for a minute.
- 💪 Strong Market - A strong labor market typically has good jobs and rising wages that encourage more people to enter the workforce. When workforce participation drops as functional unemployment rises, it suggests workers aren’t finding the opportunities they need.
- 👺 The "I" Word - In July, inflation was running at 3.4% annually while wages increased only 3.2%. That means pay wasn’t keeping up with prices, and that means folks have less money to spend. This can slow consumer spending and the economy in general, and push people into that oh-so-lovely functionally unemployed lifestyle.
🔥Bottom line: A 4.1% unemployment rate really is great, if it's real. But it can be painfully undercut by the beast of inflation, like we're seeing now. A look behind the curtain suggests the economy might actually be held together by duct tape, hope, and a whole lot of side hustles. Here's hoping they can get inflation under control and bring some sanity to the cost of, well, everything, making functional unemployment a whole lot less functional.
What do you think about functional unemployment?
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