The unemployment rate is a key piece of economic data that provides a snapshot of the state of an economy. It is a vital factor in setting monetary policy and making strategic economic decisions. There are many factors that impact the unemployment rate, including recessions, technological advances, worker immigration and a country’s labor market policies.
However, there are other factors that may not be reflected in official unemployment statistics. A recent study by the Ludwig Institute for Shared Economic Prosperity (LISEP) has found that the official U-3 unemployment rate leaves out many workers who are functionally unemployed. LISEP defines functionally unemployed workers as those who lack the means to cover basic expenses, such as shelter and food. This group includes those who are out of work for reasons such as illness, childcare responsibilities, seasonal job losses or layoffs, and those who have been laid off but who are waiting to be recalled to their jobs or who are working part-time without the benefits they would receive if they were full-time employees.
Moreover, there are those who have not lost their jobs but who are not actively looking for work, such as those who have gone back to school, individuals who have given up on their search or those who are on social welfare. These are often ignored by the Bureau of Labor Statistics in calculating the official unemployment rate. This can result in the long-term unemployed being underestimated and underserved.
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