According to a new study, true unemployment in the United States is a stunning 24.3%, as millions of Americans are “functionally unemployed.” The bold claim is a stark contrast to the reported unemployment rate of 4.2% in April, as reported by the U.S. Bureau of Labor Statistics. But in a challenging study cited by CBS News, indications are that the government data might be painting an overly pretty picture for employment opportunities.
“Functionally Unemployed”: Are Unemployment Numbers Under-reported?
The Ludwig Institute for Shared Economic Prosperity (LISEP) index indicates an increase in “functional unemployment” that, according to reports, has topped 24% for the last three months. That’s a sharp contradiction to the much-smaller government reported unemployment numbers. “We are facing a job market where nearly one-in-four workers are functionally unemployed, and current trends show little sign of improvement,” said LISEP Chair Gene Ludwig. “The harsh reality is that far too many Americans are still struggling to make ends meet, and absent an influx of dependable, good-paying jobs, the economic opportunity gap will widen.”
The True Unemployment Rate: Methodology
LISEP’s measure encompasses not only unemployed workers, but also people who are looking for work but can’t find full-time employment, as well as those stuck in poverty-wage jobs, according to CBS News. The LISEP study seeks to capture labor market nuances that other economic indicators miss, such as Americans who are left behind during periods of economic expansion. Ludwig explains that the unemployment data from the BLS (Bureau of Labor and Statistics) is flawed. “For example, [government data]
counts you as employed if you’ve worked as little as one hour over the prior two weeks. So you can be homeless and in a tent community and have worked one hour and be counted, irrespective of how poorly-paid that hour may be.” At the heart of the LISEP study is this question: what, exactly, counts as a “job”?
The study tracks what’s called a True Rate of Unemployment (TRU). In a nutshell, this metric tracks the jobless plus those seeking, but unable to find, full-time employment. The LISEP number also includes those in poverty-wage jobs. “If you’re part time and can’t get a full-time job, then we count you as functionally unemployed,” Ludwig says. People that don’t have steady work and whose jobs don’t allow them to live above the poverty line are, in essence, “functionally unemployed.”
Impact of Unemployment Numbers
The 2025 Federal Poverty guideline, for the contiguous 48 states and District of Columbia, is $32,150 per year for a family of 4, or $15,650 for one person. Note that this single annual income translates to $7.83 per hour, assuming a 40 hour week and 50 weeks worked per year. For a family of four the hourly wage rate is just over $16 per hour.
The LISEP data contradicts the current unemployment rate, which remains at or near 50-year lows. Employers continue to hire, although at a slightly slower pace than April, when the economy added 177,000 jobs. So, what’s the real number here?
Indeed’s Hiring Lab says that most official reports are still failing to capture the full labor market impact of rapid policy changes that have marked the first five months of this year. While some employers are in a “wait-and-see” mode, industries like construction, manufacturing, healthcare, professional services and tourism are continuing to see increased job postings and hiring opportunities.
To be sure, the U.S. job market is a complex and multi-faceted system. Trade wars and tariffs have not slowed down the U.S. job market, but headwinds remain for many – including government workers and technology workers that have experienced layoffs. Reports continue to share challenging job prospects for middle managers, within a complex macroeconomic picture. Unemployment numbers really depend on how jobs are counted, and what counts as a “job”.
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