The unemployment rate is one of the most widely followed economic indicators, and it provides a snapshot of the health of our nation’s civilian labor market. The number helps governmental and private institutions shape economic policy. However, one key aspect of unemployment is often overlooked – the many Americans who do not have full-time jobs or earn living wages. These “functionally unemployed” workers are left behind during periods of economic growth. That’s why, in 2020, LISEP launched a new measure that we call the True Rate of Unemployment. The True Rate seeks to capture the labor market nuances missed by existing unemployment numbers.
It measures the percentage of people who are unemployed and looking for work, as a share of the total population. It excludes people who are either retired or who stay home for family reasons (like caring for children or an ill family member), as well as people who are no longer part of the labor force because they have dropped out of school, quit their job, or were laid off and have not yet found a new job. It also excludes people who are working but whose hours have been cut back or who only have part-time jobs because that’s all they can get.
High unemployment is harmful for families, and a growing body of research shows that it has long-lasting negative effects on individuals’ financial stability, career trajectories, mental and physical health, and even their marriages. For example, families with at least one workless adult face higher rates of housing instability and are less likely to live in stable families than other families.