The polarization between those who have wealth and those who don’t continues to widen across America. The dichotomy exists between a lower level of unemployment and those that are not sustaining themselves financially. A recent Federal Reserve survey of some 12,000 households found discouraging news. One out of every four families reached don’t believe that they are “doing okay” financially. What’s just as disheartening, is that 40 percent of these Americans could not afford to pay a $400 emergency expense if it occurred. How can this be you ask? Well, to begin with, statistics, as we know, can be misleading. The unemployment rate fell to 3.9 percent in April, the lowest level since 2000. Former Federal Reserve Board Chairwoman Janet Yellen has a reason. “Unemployed workers who give up on finding a job and quit the job hunt are not included in the Census Bureau’s definition of the unemployed,” says Yellen. The decline can be two-fold. Part of it reflects the ongoing retirement of the Baby Boom generation and other long-running demographic factors, while part of it is attributable to workers getting discouraged by the lack of available positions and ending the job search. Just how many no one really knows.
The other side of the coin is those that are working. These are of course people not counted as unemployed, but just may be the ones the survey is speaking of. The Fed survey further states that, “Others who are also employed describe a very different experience: fewer hours than they want to work, only a few days’ notice on work schedules, and little in benefits or pay increases.” More than one in five said they weren’t able to pay the current month’s bills in full, and more than one in four said they skipped necessary medical care last year because they couldn’t afford it. Those amount to 20 and 25 percent, not the anemic 3.9 percent that the unemployment number states.
Perhaps a statistic that meets halfway is the U.S. Underemployment rate. The rate is created by adding unemployed workers, who are looking for work, to the number of workers employed part time but seeking full-time work. This statistic has floated between roughly 12.5 percent to 14 percent as of July 2017. This number may be more representative of the figures in the Federal Reserve survey.
President Trump has weighed in on the matter, often suggesting that the unemployment number might not be totally reflective of the American worker. In mentioning those workers not reflected in the unemployment statistic, Trump remarks, “I call them the forgotten man, the forgotten woman. But a lot of those people — a good percentage of them would like to have jobs and they don’t.”
Fed Governor Lael Brainard said in a statement that the Fed expects the unemployment rate to drop to 3.6 percent by 2020, and then back toward a full employment level of 4.5 percent. This level is where the Fed believes the balance is between growth and inflation. It’s hard to get a really accurate picture of unemployment in a constantly changing economic sea. Professor Yellen notes that the unemployment rate is still probably the single best indicator of overall economic health.