Functional Unemployment Rates Exhibit Mixed Trends as of January 2025 Amid Disparities Among Demographic Groups

Understanding Functional Unemployment: Current Trends and Impacts



The recent report by the Ludwig Institute for Shared Economic Prosperity (LISEP) has revealed intriguing insights into the state of functional unemployment in January 2025. The functional unemployment rate, a critical measurement that combines jobless individuals and those seeking full-time work above poverty wages, showed a modest improvement of 0.4 percentage points. It fell from 23.7% in December 2024 to 23.3%. However, this figure remains unsettlingly high—0.3 percentage points above what it was a year ago.

In the latest True Rate of Unemployment (TRU) report, significant disparities across demographic lines have emerged, even as the overall statistics shift. For White workers, the TRU revealed a decrease from 22.1% to 21.6%, marking the fifth consecutive month of decline. Conversely, the ramifications for Black workers were severe, with their rate soaring by 2.1 percentage points, reaching 27.8%. Similarly, the rate for Hispanic workers saw a rise of 0.4 percentage points, reaching 28.4%.

The disparity between these groups represents the largest gap in recent history. The three-month average illustrates that Black workers are experiencing a five-point disadvantage compared to their White counterparts, while Hispanic workers face a gap of 5.8 points. These figures illuminate a troubling picture where recovery appears uneven, prompting questions about systemic barriers that hinder certain populations from achieving economic stability.

LISEP Chair, Gene Ludwig, underscored the gravity of the situation, stating, "The bottom line is that overall, things are not getting better. Month-to-month fluctuations notwithstanding, the living-wage job market is worse than it was a year ago. This is not the formula for a successful economy." This statement paints a stark view of economic realities for low- and middle-income families, who continue to face vulnerabilities amidst an uncertain economic landscape.

Gender disparities within the labor market are noteworthy as well. The TRU for women fell by 1.2 percentage points, settling at 28.1%, while men's figures experienced a slight uptick of 0.1 percentage points, landing at 19%. A striking contrast is seen when juxtaposed against the official unemployment rate, cited by the U.S. Bureau of Labor Statistics, which maintains a figure of 4% for both genders. When viewing the three-month average, the gender gap has now widened to 8.8 percentage points, highlighting ongoing challenges in achieving equality within the labor market.

Despite some positive trends in the functional unemployment rate, the evidence indicates that particular groups remain stagnant or are regressing. Ludwig emphasized that low- and middle-income households continue to navigate significant economic hurdles, calling for pertinent policy adjustments to address these inequities.

LISEP has worked diligently since its inception in 2019 to provide more accurate representations of economic health, focusing specifically on middle- and lower-income households. Their approach to measuring functional unemployment aims to equip policymakers and the public with a more nuanced understanding of economic circumstances.

The necessity of a wide-reaching evaluation of the economic landscape grows increasingly clear, particularly given that traditional measurements fail to encapsulate the complexities many individuals encounter. Ensuring that economic relief measures are tailored to meet the unique challenges of various demographics is essential for fostering a more equitable society moving forward.

Gene Ludwig's extensive experience in finance and economic analysis lends a credible voice to these discussions, greatly shaping the discourse surrounding functional unemployment. With a history in both financial institutions and policy formulation, he continues to advocate for transparency in reporting unemployment and earnings, which is critical for developing effective strategies to enhance economic outcomes.

In summary, the January 2025 report from LISEP reveals that while there are glimmers of improvement in functional unemployment rates, systemic inequalities continue to challenge an equitable recovery. Addressing these disparities will be critical for both economic health and the welfare of various demographic groups going forward.

Topics Financial Services & Investing)

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