The official jobless rate is so low the Fed thinks the economy is at full employment. But a gauge of the ‘functionally unemployed’ keeps climbing

The official unemployment rate has dipped to 4.1% in July, the lowest level in recent months, but the true picture of the job market is more concerning. An alternate measure, the True Rate of Unemployment, or the "functionally unemployed," has climbed to 24.9% and has increased by 1.3 percentage points since March. This metric takes into account the jobless, those working part-time involuntarily, and those earning poverty wages.

The share of the labor force that is functionally unemployed is now higher than the official unemployment rate suggests, which could signal a weakening labor market. The Ludwig Institute for Shared Economic Prosperity, which tracks this metric, predicts that if the trend continues, it would indicate that the labor market is losing strength despite the low headline unemployment numbers.

The gender gap in unemployment rates is also notable, with the rate for women rising to 31%, the highest level since March 2021, while for men it dropped to 19.5%.