A recent essay by Eugene Ludwig published by Politico argues that despite most economic data showing a healthy US economy in 2024, things are actually really bad. He tries to convince us by providing alternative data. However, a close examination of his alternative data is unconvincing. These alternative measures are not better measures of labor markets and personal income are faring in the US. And even by many of the alternative measures, Americans are still doing well economically.
The Labor Market
Ludwig presents a measure of “true” unemployment, developed by his own organization, which suggests that about one-fourth of the potential workforce is unemployed, underemployed, or poor. While this figure may seem alarming, it is primarily an expanded measure of poverty rather than a traditional unemployment metric. This measure sets a threshold of $25,000 per worker, rather than per household, which distorts its comparability to standard poverty measures. Measuring poverty is useful, but there is no need to merge a measure of poverty and a measure of employment. Doing so only adds confusion.
Even by the author’s own measure, however, the data does not support a narrative of economic decline. The January 2025 reading of 23.3 percent was the second-lowest January reading on record, with only January 2024 registering a slightly lower rate at 23.0 percent. Furthermore, this figure is 10 percentage points below its January 1995 level, which was the first year in their data series. If anything, this suggests a long-term improvement in economic conditions rather than the economic distress the author implies, even if the number is much larger than official U-3 rate, which is currently 4 percent.
Income and Earnings
Ludwig’s second critique of economic data focuses on the BLS’s reporting of median weekly earnings, arguing that the measure excludes part-time workers and thus presents an incomplete picture. However, this complaint ignores the fact that the BLS does produce a measure specifically for part-time workers, which is also included in their monthly report. The full-time measure is valuable because the majority of the workforce—over 80 percent—consists of full-time workers.
Furthermore, tracking separate measures for full-time and part-time workers is beneficial, not misleading, as it allows for a clearer understanding of labor market trends. Many part-time workers are students, caregivers, or individuals who voluntarily choose part-time work for lifestyle reasons. While their earnings are important, lumping them together with full-time workers would distort the overall picture of wage trends.
More importantly, inflation-adjusted median earnings for part-time workers have reached record highs, except for the anomalous quarters during the pandemic. While part-time wages remain lower than full-time wages, the trend does not support the claim that earnings data systematically understate economic distress.
Inflation and the Consumer Price Index
The essay also challenges the accuracy of inflation data, though at least this critique does not rely on extreme revisions such as those from ShadowStats. However, the claim that alternative measures provide a substantially different picture of inflation is exaggerated. The BLS itself already produces an experimental CPI broken down by income quintile.
The differences between the author’s preferred measure and official CPI figures are relatively modest. Since the end of 2005—when the BLS began providing a specific research series—prices have increased 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 experienced slightly higher inflation, the variation is not as drastic as the author implies.
Furthermore, when using these inflation figures to adjust for real wage growth, data shows that real wage gains have been strongest for low-income workers since 2019. This contradicts the argument that inflation has uniquely harmed the lower-income segment of the workforce. Instead, evidence suggests that wage growth at the bottom of the income distribution has outpaced price increases, resulting in real gains for lower-income workers.
GDP and Income Distribution
The author’s final critique centers on GDP, arguing that a single measure cannot capture income distribution effectively. While this point is reasonable—GDP does not and cannot account for inequality—the implication that economic gains have not been shared is misleading.
He mentions a survey from the Federal Reserve which suggests Americans without college degrees are worse off since 2013, but data from the Federal Reserve’s Survey of Consumer Finances (SCF), which looks at the actual wealth levels of families, paints a different picture. The SCF shows that inflation-adjusted wealth gains have been largest for individuals without college degrees, even though those with degrees still hold significantly more wealth. This suggests that, despite disparities, economic gains have not been confined to the wealthiest segments of society.
We can also look at data on the Ludwig Institute’s own website to see weekly earnings across the income distribution. Their data shows that across the income distribution, wages have grown substantially and are essentially at record highs. Their series starts in 1982, and since the largest real income gains have come at the bottom of the distribution, with the 25th percentile worker seeing a 71 percent increase in earnings, compared with a 49 percent increase for the richest workers they track (the 90th percentile).
Conclusion
The author of the Politico essay says that we want prosperity that is shared. He even put that phrase as the title of his Institute. But using his own data, as well as other data sources, we can see that we already have shared prosperity in America: incomes have been rising across the distribution, poverty is at some of the lowest levels we have ever seen, and unemployment is near record lows. America faces many economic challenges, but many of the solutions to those problems involve continuing the path of economic growth we have already followed, not changing course.
Jeremy Horpedahl is Associate Professor of Economics at the University of Central Arkansas. He blogs at Economist Writing Every Day.
For more articles by Jeremy Horpedahl, see the Archive.
