Nearly one in four American workers is considered “functionally unemployed,” according to a new analysis from the Ludwig Institute for Shared Economic Prosperity, underscoring persistent weaknesses in the U.S. labor market that are not reflected in official unemployment statistics.
The institute’s True Rate of Unemployment (TRU) for November shows that 24.8 percent of the labor force falls into this category. While the figure shows a slight improvement relative to earlier in the fall, it remains higher than a year ago. It stands in stark contrast to the government’s headline unemployment rate of roughly 4.6 percent. The gap highlights the difference between formal employment levels and the day-to-day economic reality faced by many workers.
Unlike the standard unemployment rate, the TRU includes not only individuals without jobs but also those who are involuntarily working part-time and workers earning poverty-level wages. For 2025, the institute defines low-wage employment as earning $26,000 or less annually. Under this broader definition, millions of Americans are technically employed yet still unable to achieve financial stability.
The data also reveal significant demographic disparities. Functional unemployment remains higher among Black and Hispanic workers compared with White workers, and women continue to be disproportionately affected. The TRU for women rose to just over 30 percent, while the rate for men declined to about 20 percent, indicating uneven labor market outcomes despite overall job growth.
Gene Ludwig, chair of the institute, pointed to stagnant real wages and rising living costs as central factors driving functional unemployment. Many workers, he noted, are unable to keep pace with expenses for housing, food, healthcare, and transportation, even when employed.
The findings come amid broader uncertainty surrounding economic data, following recent disruptions to federal household employment surveys. Against this backdrop, the Ludwig Institute argues that alternative measures such as the TRU provide critical insight into job quality, not just job quantity.
As policymakers and economists assess the health of the U.S. economy, the report suggests that headline employment figures may obscure the scale of underemployment and low-wage work. While official statistics point to a resilient labor market, the institute’s analysis indicates that a substantial share of the workforce remains under economic pressure, raising renewed questions about wage growth, job security, and long-term prosperity.
