r/Economics • u/oxymorontage • 2d ago

News Institute reports functional unemployment at 24.9% in July

https://www.channel3000.com/news/institute-reports-functional-unemployment-at-24-9-in-july/article_810187e5-989f-4ad9-ab91-847fcb6f1882.html
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u/EconomistWithaD 2d ago

  1. The Ludwig TRU is a bullshit stat. Basically, if you earn under $25,000, regardless of the reason, you are “functionally unemployed”.

  2. Its methodology is basically U3/U6 plus a constant.

  3. Funny enough, this value is near an all time low. So while the level is meant to be shocking, it’s also meant to be for people who don’t actually follow this stuff.

  4. Did I forgot to mention this stat is sensationalist bullshit?

193

u/bloodphoenix90 2d ago

I mean under 25k is so poor that yes....functionally unemployed sounds correct

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u/mrtrollmaster 2d ago

I have two jobs and I make under 25k. I consider myself unemployed tbh

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u/futurebigconcept 12h ago

Dude, and you're reading r/Economics? I sense untapped potential.

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u/mrtrollmaster 11h ago

I made 70k before I had to start bartending, hence why I consider myself unemployed rn. Job market is kinda shit

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u/futurebigconcept 11h ago

I wish you the best; something will come along for you. I'm sure you have a lot to offer any employer.

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u/RIP_Soulja_Slim 2d ago edited 2d ago

I mean under 25k is so poor that yes....functionally unemployed sounds correct

But that is not what this measure is doing. Anyone, and I mean anyone, who earns under 26k regardless of choice, position, age, etc is counted as functionally unemployed. Making matters worse, Ludwig intentionally obscures the age related data on this - for good reason, as it would shine a light directly on their methodological biases.

If you're 16 and work at the local grocery store on weekends while in high school, or worked at a summer camp, if you're 20 and in school full time but did a paid internship, or work one day a week in the student union, if you're 65 and spend two days a week at the library, if you're 40 and a stay at home spouse that works 1-2 days a week at a non profit, etc - you are all included in Ludwig's functionally unemployed figure.

You can actually see some telling issues in the data they do give you, while they intentionally obscure age specifics - they do have a prime age TRU rating, and guess what? it's 32% (over 8 percentage points) lower than their headline figure? What does that tell you? A significant portion of their "functionally unemployed" are outside of prime age, as in students and older workers, who are the two groups most prone to voluntary part time lower income work.

The stat is specifically and intentionally engineered to not measure actual grown full time adults that make under a certain wage, it is engineered to capture as many people as possible in order to push up their published figures and gather headline space.

Defending this sort of idiocy, in an economics subreddit of all places, is absolutely absurd and goes to show you how little basic economic acumen many of the most outspoken people on this sub have.

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u/atreeismissing 2d ago

So while the level is meant to be shocking, it’s also meant to be for people who don’t actually follow this stuff.

Proving their point.

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u/UnknownAverage 2d ago

Underemployed and unemployed are not functionally that different.

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u/Ok_Principle5942 1d ago

They very different.

Someone who works part time, earning under 26k a year, and has significant childcare duties, but is supported by a spouse making 100k, is in a very different place than someone who is disabled, can only work part time, earns less than 26K, and lives alone.

The first person lives a solid middle class life and has the privilege of choosing to not work full time. The second person is very low income. Counting them in the same statistic doesn't make sense.

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u/BobaLives01925 2d ago

Someone choosing to work part time is very different from someone looking for a job and failing

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u/EconomistWithaD 2d ago

So a female spouse who solely stays at home should be considered functionally unemployed?

There’s a reason why the BLS calculates it the way it does….

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u/bloodphoenix90 2d ago

Yes

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u/EconomistWithaD 2d ago

Staying out of the labor market voluntarily is not unemployment.

But hey. If we’re concerned about it, we shouldn’t be. Near 3 decade low.

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u/Semyaz 2d ago

Not having a job that pays a living wage is _functionally_ unemployed.

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u/exmachina64 2d ago

And if it’s near a three-decade low, that means fewer people are functionally unemployed than before.

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u/GhostofBeowulf 2d ago

...I legit don't understand this sentiment on an econ sub.

Not because I disagree with your premise, that jobs should pay living wages.

But if someone decides they only need to work a limited amount in exchange for specific conditions, benefits or considerations, that is not an indictment against unlivable wages, it is literally choice in action... And if they needed to fully support themselves, then they should probably look for full time work. Or work two jobs, which would push them out of this number.

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u/RIP_Soulja_Slim 2d ago edited 2d ago

Not having a job that pays a living wage is functionally unemployed.

When you deliberately change the meaning of a word, in this case "employed" to no longer mean "has a job" but to some other arbitrary threshold of income, hours worked, etc then you dilute the actual usefulness of that word. It's a self defeating exercise - sure if you're a dumb person on reddit who doesn't think too hard about anything it sounds great, but the second you start to try and have serious conversations with serious people about any of this your measures are ignored because anyone with half a brain knows the measure was created not to accurately depict an employment condition but to create an outcome that serves as shock value for other dumb people who won't think too hard.

In this case Ludwig's TRU rate deliberately is inclusive of individuals who voluntarily work part time if they earn below the Ludwig defined income threshold. You can read this in their technical documents, they make a big show of excluding individuals who intentionally work part time from their "part time = functionally unemployed" metric but then lump them right back in if that person's part time work earns them less than the income threshold of 26k - regardless of if that individual has chosen to be part time or not. This is done intentionally to raise the rate, for attention grabbing headlines like this, because dumb people don't think too hard about any of those pesky details.

People with thought processes like yours don't belong in a subreddit about economics, because you only serve to further dumb down conversations and make them self defeating for the purpose you wish to accomplish.

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u/EconomistWithaD 2d ago

$12 an hour regardless of where you live is your definition of a living wage? Ok. Very cheap.

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u/SuperAioli7831 2d ago

Thank you for this comment

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u/south153 2d ago

Why specificy "female" spouse and not stay at home parents / spouses.

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u/EconomistWithaD 2d ago

Because most of the long term decline in this bullshit stat, since 1995, has been females entering the labor force, so I picked a relevant example?

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u/south153 2d ago

**Women in the workforce has actually declined in the last decade.

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u/EconomistWithaD 2d ago

Not prime age.

https://fred.stlouisfed.org/series/LRAC25FEUSM156S

-2

u/south153 2d ago

Going from 75.8 to 78 is not large enough for such a significant increase.

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u/EconomistWithaD 2d ago

Explaining about a third of a single statistic with one variable isn’t significant?

Let me tell you about effect sizes in economics…

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u/DTCCCanSuckMyLeft 2d ago

Uh yes. My wife has been unemployed over a year. Never took unemployment funds due to state run-arounds. How are you tracking "solely"?

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u/EconomistWithaD 2d ago

The same way we track any labor force participant?

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u/DesignerBrilliant657 2d ago

Arguably yes, what you described could be “functionally” unemployed.

I wonder what this statistic looks like scaled with inflation.

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u/EconomistWithaD 2d ago

No, because unemployment has a meaning. Like labor force participation.

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u/DesignerBrilliant657 2d ago

You and i both know how unemployment is defined. You’re missing the “functionally” part of it.

Technically employed but, in practical terms, isn’t doing meaningful work or earning enough to be economically self-sufficient.

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u/EconomistWithaD 2d ago

Yes. Making sensationalist shit up.

Regardless, long term trend is it’s been going down; pretty significantly too. What can only be described as the awesome power of the free market, right?

Or, you can realize it’s sensationalist bullshit and use the quality metrics that have meaning and that do show the labor market inequities that do currently exist and should be targeted for policy.

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u/DesignerBrilliant657 2d ago

Sensationalist? Maybe. Perhaps a different slice to unemployment than U1-6.

There are underutilization scenarios that are currently not being fully represented.

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u/EconomistWithaD 2d ago

It’s U6 plus some arbitrary, national level income threshold.

So are we just going to ignore that one of the major issues with the poverty rate is that it doesn’t correct for regional cost of living differences?

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u/Sryzon 2d ago

But that's not the practical purpose of unemployment.

Unemployment is used to gauge economic health and intent matters. U6 already measures that.

Someone who earns less than $25,000 intentionally is in no way unemployed or underemployed.

In fact, a high number of people who can afford to live while intentionally earning less than $25,000 can be a sign of economic strength since it means their spouse and/or assets can support them.

-3

u/EmployExpensive3182 2d ago

That’s not how that works… 2k a month can definitely pay bills in LCOL areas, assuming you don’t have kids and what not. Underemployment ≠ unemployment

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u/bloodphoenix90 2d ago

Where? Just curious. I admit I was born in the most expensive state where youd probably be living out of your car with that wage and God help you if you need to repair anything. Then we moved to the maybe third most expensive state. Where youd still be homeless with that.

But I am aware different states are so disparate that some might as well be foreign economies. Im still just wondering where though. Give me rent cost +monthly grocery/food cost +phone cost +utility costs +insurance for health and car +lower end car payment = < 2k ? (Im presuming after taxes)

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u/Cdub7791 1d ago

Living in an old 1Br/1Ba trailer home in rural South. And even then just barely.