In a recent essay for Politico, Eugene Ludwig argues that despite a plethora of economic indicators suggesting a robust US economy in 2024, the reality is far grimmer. He attempts to persuade us with alternative data, but a closer look reveals these metrics lack credibility. In fact, even by his alternative standards, Americans appear to be economically thriving.
The Labor Market
Ludwig introduces a concept of “true” unemployment crafted by his organization, claiming that approximately one-fourth of the potential workforce is either unemployed, underemployed, or impoverished. While this statistic sounds disturbing, it’s essentially a redefined poverty metric, rather than a conventional unemployment figure. This modified approach sets a threshold of $25,000 per worker rather than per household, creating a misleading comparison with standard poverty measures. While assessing poverty is valuable, conflating it with employment metrics only serves to muddle the waters.
Even according to Ludwig’s own alternative measure, the data do not substantiate his narrative of economic decline. The January 2025 figure of 23.3 percent marks the second-lowest January reading in history, with only January 2024 posting a marginally lower rate of 23.0 percent. This represents a notable 10-point decrease from the January 1995 level, the inaugural year of their data series. Instead of indicating economic distress, this trend reflects a long-term improvement in economic conditions, even when juxtaposed with the official U-3 rate, currently at 4 percent.
Income and Earnings
Ludwig further critiques the Bureau of Labor Statistics’ (BLS) median weekly earnings report, claiming it omits part-time workers and thus provides an incomplete view. However, he overlooks that the BLS also generates a measure for part-time workers that is included in their monthly outputs. The full-time earnings measure is particularly important, as over 80 percent of the workforce is composed of full-time employees.
Moreover, differentiating between full-time and part-time earnings is enlightening, not misleading, as it clarifies labor market trends. Many part-time workers are students, caregivers, or those opting for part-time work for personal reasons. While their earnings matter, amalgamating them with full-time wages would obscure the overall wage trend.
Significantly, inflation-adjusted median earnings for part-time workers have reached historical highs, with the sole exceptions being during the pandemic. While part-time wages typically lag behind full-time wages, this trend does not substantiate the assertion that earnings data inherently underrepresent economic hardship.
Inflation and the Consumer Price Index
The essay also questions the reliability of inflation data, although this critique is less extreme than those from ShadowStats. Nevertheless, the assertion that alternative measures paint a vastly different inflation landscape is overstated. The BLS already produces an experimental CPI segmented by income quintile.
The disparities between Ludwig’s preferred metrics and the official CPI figures are relatively minor. Since 2005, when the BLS initiated its specific research series, prices have surged by 64.4 percent for the lowest income quintile, 60.7 percent for the middle quintile, and 56.8 percent for the highest quintile. While the lowest-income households have indeed experienced slightly higher inflation, the differences are not as significant as he suggests.
Furthermore, adjusting real wage growth with these inflation figures reveals that real wage increases have been most robust for low-income workers since 2019. This counters the argument that inflation has disproportionately harmed lower-income workers. Instead, it appears that wage growth for those at the lower end of the income spectrum has outpaced price increases, resulting in real economic gains.
GDP and Income Distribution
Finally, Ludwig critiques GDP, claiming it fails to accurately capture income distribution. While this assertion holds merit—GDP alone cannot encapsulate inequality—the insinuation that economic benefits are unequally shared is misleading.
He references a Federal Reserve survey indicating that Americans without college degrees are worse off since 2013; however, data from the Federal Reserve’s Survey of Consumer Finances (SCF), which examines actual family wealth, tells a different story. The SCF shows that inflation-adjusted wealth gains have been most pronounced among individuals lacking college degrees, despite those with degrees still possessing significantly more wealth. This indicates that, although disparities exist, economic gains have not been confined to the wealthiest sectors of society.
Additionally, if we examine data from the Ludwig Institute’s own website, we find weekly earnings across the income distribution show significant wage growth, essentially reaching record highs. Their series, which dates back to 1982, highlights that the greatest real income increases have occurred at the bottom of the distribution, with the 25th percentile worker witnessing a 71 percent rise in earnings, compared to a 49 percent increase for the wealthiest workers tracked (the 90th percentile).
Conclusion
Ludwig contends that we desire a form of prosperity that is shared, even naming his institute after this concept. However, an analysis of his own data, alongside other sources, reveals that shared prosperity is indeed a reality in America: incomes are rising across the board, poverty is at historically low levels, and unemployment is nearing record lows. While America does face numerous economic challenges, many solutions lie in sustaining the trajectory of economic growth we are already experiencing, rather than veering off course.
Jeremy Horpedahl is an Associate Professor of Economics at the University of Central Arkansas and writes at Economist Writing Every Day.
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