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October 27, 2020

“Real” Unemployment

Author: Kristopher W. Carroll, CFA®, CFP®

You’ve probably read that unemployment in America is 7.9%, down from over 15% earlier this year.  That’s bad, but not really terrible since it appears to imply that 92.1% of Americans looking for a job can find one.

Yet when you dig a little deeper, as a statistician from the Ludwig Institute for Shared Economic Prosperity recently did on, you find a darker picture.  He notes that the U.S. Bureau of Labor Statistics deems a person to be “unemployed”  if he or she is earning no money whatsoever and actively looking for work.    

A deeper dive into the numbers starts with a new definition, which is anyone who is looking for a full-time job that pays a living wage, but cannot find one.  Using the same data from the Bureau of Labor Statistics, the statistician looked back to January of this year when the official rate of unemployment was 3.6%.  He found that what he calls the “true” rate was actually seven times greater at 23.4%.  The “true” unemployment rate for white Americans rose above 30% in recent months before settling back down to its current rate of 23.6%.  Black Americans are currently living with a “true” unemployment rate of 30.4%.  Only 46.1% of white Americans and 40.8% of Black Americans now have a full-time job paying more than $20,000 per year.

You can see from the chart above that the current unemployment catastrophe is actually nothing new.  Low rates of employment and low incomes have been at crisis levels for decades, but the crisis has been hidden behind official numbers. 

Bottom Line: The American economy must do better.


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