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Functional Unemployment Down for Black Workers

Societal and economic factors may be squeezing Black workers out of labor market

WASHINGTONMay 17, 2023 /PRNewswire/ — The percentage of Black workers in the labor market with living-wage jobs is at an all-time high, according to the Ludwig Institute for Shared Economic Prosperity (LISEP). But the improvement in April may be less about getting better jobs, and more about workers dropping out of the job market.

“Any time we see numbers trending in a positive direction we are encouraged things are getting better for low- and middle-income families, but just because the numbers look better doesn’t mean circumstances are improving,” said LISEP Chairman Gene Ludwig. “It’s important to dig deeper into the numbers to understand the ‘why’.”

In LISEP’s monthly True Rate of Unemployment (TRU) report for April, the overall “functional unemployment” rate increased from 22.9% to 23.1% but was mixed among demographic groups. LISEP defines functionally unemployed as the jobless, plus those seeking, but unable to find, full-time employment paying above the poverty line after adjusting for inflation. By contrast, the U.S. Bureau of Labor Statistics (BLS) reported a decrease in the official jobless rate, from 3.5% to 3.4%.

Among key demographics, the TRU for White workers went up half a percentage point, from 21.5% to 22%, while the TRU for Hispanic workers went down a full percentage point, from 27.2% to 26.2%. For men, the TRU dropped 0.4 percentage points, from 19.3% to 18.9%, while for women the TRU increased, from 27% to 27.9%.

Black workers seemingly hit a TRU milestone during April, with a rate that dropped from 25.4% to 24.5% — the lowest rate since January 1995, the first month for which LISEP has data. But TRU’s sister metric, TRU Out of the Population (TRU OOP), suggests the improvement is the result of Black workers leaving the labor force, because they are finding full-time employment. TRU OOP serves as an indicator of workforce participation by measuring the percentage of the total working-age population seeking, but unable to find, a full-time paying job above the poverty level. During this same time period, TRU OOP only improved 0.1 percentage points for Black workers.

LISEP notes no single factor could be isolated as a cause for this shift but speculated inflationary pressures on expenses associated with holding a job, such as childcare and transportation, may mean some low-wage jobs are now money-losing propositions. Regardless, Ludwig said, this is a turn of events in need of further investigation.

“This is a perfect example of why policymakers cannot rely on government headline statistics alone on matters involving the nation’s economic well-being,” Ludwig said. “In spite of official numbers that may show record low unemployment and rising wages, a deeper dive into these data reveals that a large swath of American households are getting squeezed from all sides. We know the ‘what.’ Now it is up to policymakers to determine the ‘why’ and begin the discussion toward a reasonable solution.”

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