The age of gated recessions

In a puzzling twist in the U.S. labor market, the Bureau of Labor Statistics announced a loss of 23,000 jobs in July, yet the unemployment rate dropped to 4.1 percent. This apparent paradox can be explained by discouraged workers abandoning the job search. In the U.S., to be considered unemployed, individuals must actively seek employment.

However, with the job market in such a dire state, many have given up looking for work. Economists refer to this phenomenon as the "discouraged worker" effect. Consequently, the unemployment rate can decline even as labor demand declines, because the labor supply is falling at a faster rate. Estimates suggest that over two million people have exited the U.S. labor force since November 2025.

The U.S. ranks high among advanced economies in terms of poverty. In 2024, 10.6 percent of Americans lived below the poverty line, defined as an annual income of less than $31,812 for a family of four. Some observers contend that this figure may not fully capture the true scale of the issue, as poverty encompasses more than mere income levels.