With Jobs Report Delayed, Does “Real” Unemployment Tell a Scarier Story?

With Jobs Report Delayed, Does “Real” Unemployment Tell a Scarier Story?

 

With the latest official government jobs report delayed due to the shutdown, employers, workers, and policymakers are trying to understand the labor market without crucial data. This week, conflicting private reports have only added to the confusion: one found only 42,000 new jobs, while another reported over 150,000 job cuts in October, the highest in over two decades, partly tied to the AI boom.

While the official unemployment rate hovers at a low 4%—less than the average of any decade since the 1960s—this “rosy picture” hides a grim reality for many. Two-thirds of U.S. workers report living paycheck-to-paycheck, and many, like one 33-year-old marketing professional laid off in 2023, now work three jobs just to make ends meet.

“I don’t remember a time… where it has felt this difficult,” she said.

Experts argue the problem lies in how the government defines unemployment. The definitions, established in the 1930s, count someone as “employed” if they worked at least one hour for pay in a week.

“These definitions were established… when it was much more typical for someone either to have a factory job… or to not have one,” noted a former BLS commissioner. “Our gig economy… is a different world.”

This old metric ignores millions who are underemployed (like gig workers wanting full-time hours) or earn wages too low to live on. A former comptroller of the currency, Joseph Ludwig, proposes a “functional unemployment rate,” which includes those who can’t find enough work or earn less than $25,000 a year.

His calculation? The “real” functional unemployment rate is between 24% and 25%.

This massive gap between the 4% headline number and the 25% functional rate has serious consequences. “It paints a much rosier picture,” Ludwig says. “It causes policymakers not to take the problem as seriously as it really is.”

While the labor market may not be cratering, it does not look very strong for a large portion of the American workforce struggling in a gig-based economy that official numbers fail to capture.

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