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 Labor Department’s unemployment rate has been declining in recent months, reversing last year’s uptick, but an alternate measure tells a different story.

In July, the official rate dipped to 4.1%, down from 4.2% in June and 4.5% in November. This coming Friday, the August jobs report will come out, and Wall Street expects the rate to hold steady at 4.1% while payrolls expand by 50,000, rebounding from a surprise loss of 23,000 in July.

Despite weak job gains lately, the Labor Department’s metric for joblessness has been falling as retiring baby boomers and President Donald Trump’s immigration crackdown shrink the overall labor market.

In fact, the breakeven rate of employment growth, or the number of net new jobs needed each month to keep the unemployment rate steady, actually went slightly negative during the summer and fall of 2025. And economists expect that to happen again in 2028, meaning the economy would have to shed workers to keep........

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