Unemployment is not just a figure that measures the number of people who cannot find jobs, but it also has costs for individuals, families and society as a whole. Workers lose income, and families lose the spending power that comes from having a job. The economy suffers from the goods and services that aren’t being produced, while businesses often reduce work hours or lay off staff in a struggle to remain competitive. As a result, the unemployment rate usually declines only after the economy has recovered from its most severe downturn and when companies begin hiring again.
A broad array of measures are available to gauge the state of the labor market, including the official headline unemployment rate, a number that excludes those working only part time or who have given up looking for work. Another important metric is the underemployment rate, which includes those who are working but would prefer full time jobs and those who are working but have insufficient hours to earn a living wage. Finally, the JOLTS report offers a snapshot of the number of job openings available for people seeking work.
LISEP developed the True Rate of Unemployment (TRU) to provide analysts and policymakers with an alternative to standard unemployment figures. To calculate it, we use data compiled by the Bureau of Labor Statistics (BLS) to determine how many Americans are functionally unemployed, or can’t afford to put food on the table or pay their rent or mortgages. The LISEP definition of functionally unemployed includes those who can’t find full-time employment, aren’t earning enough to meet their basic expenses and are not actively searching for jobs. In addition, it counts Black, Hispanic and female workers as functionally unemployed at rates significantly higher than for White workers.