“Functionally unemployed”: A better metric?
April job statistics came out and unemployment hovers around 4.2%. But another group who analyzes employment says unemployment is actually around 24.2%. This other group are measuring the “functionally unemployed”.
What accounts for the discrepancy between the group and the Bureau of Labor?
Well, the group LISEP (Ludwig Institute for Shared Economic Prosperity) includes in their unemployment numbers those who only worked for 1 hour/week, those looking for full-time employment and can’t find work, and those who work in poverty-wage jobs.
What LISEP is trying to measure is employment reflecting a healthy labor environment, not a poverty inducing one.
Bureau of Labor definition of employed
From the Bureau of Labor, I find the following definition:
In the Current Population Survey (CPS), people are classified as employed if, during the survey reference week, they meet any of the following criteria:
- worked at least 1 hour as a paid employee (see wage and salary workers)
- worked at least 1 hour in their own business, profession, trade, or farm (see self-employed)
- were temporarily absent from their job, business, or farm, whether or not they were paid for the time off (see with a job, not at work)
- worked without pay for a minimum of 15 hours in a business or farm owned by a member of their family (see unpaid family workers)
For criteria 1 and 2, the work must be for pay or profit; that is, the individual receives a wage or salary, profits or fees, or payment in kind (such as housing, meals, or supplies received in place of cash wages). For the self-employed, this includes those who intended to earn a profit but whose business or farm produced a loss. See the definition of self-employed for further details.
Each employed person is counted only once in aggregate employment statistics from the CPS, even if they hold more than one job.
The following are not considered employment in the CPS.
- volunteer work
- unpaid internships
- unpaid training programs
- training programs not sponsored by an employer, even if the trainee receives a public assistance payment for attending
- National Guard or Reserve duty (weekend or summer training)
- ownership in a business or farm solely for investment purposes, with no participation in its management or operation
- jury duty
- work around one’s home such as cleaning, painting, repairing, or other housework or home improvement project
Intention of measuring “functionally unemployed”
I would imagine that society would want to measure the economy so that no one lives in abject poverty or want the normal things in life such as food, clothing, housing, education.
Otherwise, we would have the following situation:
“For example, it counts you as employed if you’ve worked as little as one hour over the prior two weeks. So you can be homeless and in a tent community and have worked one hour and be counted, irrespective of how poorly-paid that hour may be.”
Megan Cerullo, CBS, “About 1 in 4 Americans are ‘functionally unemployed,’ researcher says”, May 26, 2025
To read the full article behind the “functionally unemployed” concept, click on this link.
To reach the site that is producing these alternate employment data, click here.
“Functionally unemployed” data is worth following.
I do believe that this employment statistic is worth following because it is providing a better hint of how the labor market is working (or maybe not working). This metric might be a better gauge of people sentiment, especially for politicians and policy wonks.
With the coming AI disruption (depending on who you listen to – right now my newsfeed is filled with doom and gloom), we need a better assessment of the labor market and the “functionally unemployed” might be a better indicator. Although I suspect the regular unemployment rate will become so terrible, maybe even worse that than during the Great Depression (again, depending on who you listen to), the “functionally unemployed” becomes a moot point.
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