The Labor Department\u2019s unemployment rate has been declining in recent months, reversing last year\u2019s uptick, but an alternate measure tells a different story.<\/p>\n
\n
In July, the official rate dipped to 4.1%, down from 4.2% in June and 4.5% in November. This coming Friday, the August jobs report will come out, and Wall Street expects the rate to hold steady at 4.1% while payrolls expand by 50,000, rebounding from a surprise loss of 23,000 in July.<\/p>\n
Despite weak job gains lately, the Labor Department\u2019s metric for joblessness has been falling as retiring baby boomers and President Donald Trump\u2019s immigration crackdown shrink the overall labor market.<\/p>\n
In fact, the breakeven rate of employment growth, or the number of net new jobs needed each month to keep the unemployment rate steady, actually\u00a0went slightly negative\u00a0during the summer and fall of 2025. And economists expect that to happen again in 2028, meaning the economy would have to shed workers to keep unemployment steady.<\/p>\n
Meanwhile, jobless claims have also remained low, continuing a low-hire, low-fire labor market, as business stay cautious amid Trump\u2019s tariffs and war on Iran.<\/p>\n
The official unemployment is so low that Federal Reserve policymakers see it as a signal the economy is at or near full employment. Fed Chairman Kevin Warsh said as much during his speech in Jackson Hole, Wyo., on Friday.<\/p>\n
As a result, the Fed\u2019s attention is now fixed on fighting inflation, instead of the other part of its dual mandate, namely supporting the labor market.<\/p>\n
But the Ludwig Institute for Shared Economic Prosperity\u00a0doesn\u2019t have such a rosy view on the workforce. It has a True Rate of Unemployment that measures the \u201cfunctionally unemployed,\u201d who include the jobless, those involuntarily working part-time, and those earning a poverty wage.<\/p>\n
That score saw its fourth consecutive increase in July, contrasting with the official jobless rate that has been steadily declining this year. The share of the labor market that\u2019s functionally unemployed is now at 24.9% and has climbed 1.3 percentage points since March. <\/p>\n
Similarly, LISEP\u2019s measure of the percentage of the working-age population not functionally employed\u2014including those who dropped out of the labor force\u2014hit 53.8%, up 0.8 percentage points since the start of the year.<\/p>\n
\u201cFunctional unemployment is moving higher while workforce participation is moving lower. If this continues, it would suggest the labor market is losing strength despite what we may see in the headline unemployment numbers,\u201d LISEP Chairman Gene Ludwig said in a release on Aug. 20.<\/p>\n
The functional unemployment rate for Black workers was flat at 27.3% last month, and increased 0.6 percentage points to 23.8% for white workers, while it fell 1.5 percentage points to 26.7% for Hispanics.<\/p>\n
For men, the rate dropped 0.9 percentage points to 19.5%, but for women, it jumped 1.6 percentage points to 31%, marking the highest level since March 2021 when the economy was still recovering from the COVID shock.<\/p>\n
Some of the demographic differences could reflect several cross currents in the economy. The AI boom has sparked massive demand for construction and workers in skilled trades, traditionally male-dominated jobs. At the same time, a crisis in family-care services has forced many women to pull back from their careers.<\/p>\n
\u201cIn a strong labor market, good jobs and rising wages should bring more people into the workforce, not fewer,\u201d Ludwig said. \u201cWe need to pay attention when that starts moving in the other direction. It could be a sign that people aren\u2019t finding the opportunities they want or need, which matters for the broader economy.\u201d<\/p>\n<\/div>\n
#official #jobless #rate #falling #number #functionally #unemployed #climbing<\/p>\n","protected":false},"excerpt":{"rendered":"
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<\/p>\n