What's Happening?
A recent report from the Ludwig Institute for Shared Economic Prosperity (LISEP) has revealed that nearly a quarter of the American workforce is 'functionally unemployed.' This includes individuals who are jobless, those seeking but unable to secure full-time
employment, and workers earning poverty wages, defined as $26,000 or less annually. The report indicates that 24.8 percent of workers fall into this category as of November, marking a 0.7 percent increase over the past year. The LISEP's 'True Rate of Employment' (TRU) contrasts with official figures from the Bureau of Labor Statistics, which reported a 4.6 percent unemployment rate in November. The report comes amid a surge in layoffs, with U.S.-based employers announcing 71,321 job cuts in November, a 24 percent increase year-over-year, bringing the total for 2025 to nearly 1.2 million, the highest since 2020.
Why It's Important?
The findings from LISEP underscore a deeper structural crisis within the U.S. labor market, which may not be fully captured by traditional unemployment metrics. The report suggests that the labor market has become less forgiving, with stagnant wages and elevated prices for basic necessities stretching household budgets. This situation is particularly acute during the holiday season, affecting many households. The disparity between official unemployment figures and the TRU highlights the challenges faced by minority groups, with higher rates of functional unemployment among Black and Hispanic workers compared to White workers. The report calls into question the adequacy of current employment measures and suggests a need for more comprehensive metrics to inform policy decisions.
What's Next?
The Department of Labor is set to release its employment report for December on January 9, with forecasts indicating another slow month for hiring and a potential increase in the unemployment rate to 4.7 percent. This upcoming report will be closely watched by policymakers and economists for signs of improvement or further deterioration in the labor market. The ongoing layoffs and high functional unemployment rates may prompt discussions on labor market reforms and support measures for affected workers.
