Wages Down in Q2, June 'Functional Unemployment' Up, Says Ludwig Institute

True Rate of Unemployment inching upward but remains below late 2025 peak

WASHINGTON, July 22, 2026 /PRNewswire/ -- Functional unemployment continued to inch upward in June, while second-quarter real median weekly earnings declined year over year, according to the Ludwig Institute for Shared Economic Prosperity (LISEP).

LISEP has issued its June True Rate of Unemployment (TRU) and Q2 2026 True Weekly Earnings (TWE) reports. The TRU measures the "functionally unemployed"—defined as the jobless, the involuntarily part-time, or those earning a poverty wage. The TWE measures inflation-adjusted median weekly earnings across the entire workforce, including part-time workers and those unemployed but seeking work.

The median Q2 TWE declined 0.5% year over year to $1,033, while remaining flat compared to the previous quarter. By comparison, the Bureau of Labor Statistics' median earnings measure—which only includes full-time workers—increased 0.8% year over year to $1,251, despite declining 0.2% from the previous quarter. Year-over-year earnings declined across all income distributions in the TWE, with lower-wage workers experiencing the largest losses. At $633 per week, workers in the 25th percentile saw a 0.8% decline, while workers in the 75th percentile saw earnings drop 0.3% over the past year, to $1,741. Higher-income earners (90th percentile) saw a 0.4% decrease, to $2,773.

Quarter over quarter earnings increased 0.6% for low-income workers (25th percentile), largely due to lower unemployment. The TWE declined 1.1% for workers in the 75th percentile and 0.4% for those in the 90th percentile due to both seasonal patterns and high inflation.

By demographic, Black workers saw median weekly earnings increase 0.7% both year over year and quarter to quarter, to $869. Hispanic workers saw no change from Q1 to Q2 but increased 1.8% year over year, to $852. Earnings for Asian workers are up 7.0% quarter to quarter to $1,374, though they were up just 1.5% year over year. White workers' median TWE was unchanged year over year at $1,167, while median earnings from Q1 to Q2 fell 1.1%. This is the lowest annual change since Q2 2024.

While the gender wage gap narrowed from quarter to quarter, women continued to experience larger year-over-year earnings declines than men. The TWE for women increased 0.3% to $919 in the last quarter, compared to a 1.8% decrease for men, to $1,181. However, median earnings for women are down 0.7% year over year, compared to a 0.3% decline for men. The gender median pay gap remains approximately 78 cents on the dollar.

"While there are some encouraging signs in the latest quarterly data, the broader trend remains clear," said LISEP Chair Gene Ludwig. "Workers at the 25th percentile continue to experience the largest year-over-year decline in real earnings, underscoring that many Americans are still losing ground even as headline economic indicators suggest a stronger labor market."

The labor market showed similar signs of strain. June functional unemployment—as measured by the TRU—increased 0.1 percentage points, from 24.6% to 24.7%, marking the third consecutive monthly increase. Over the past three months, the TRU has averaged 24.5%, an improvement from the 24.9% average recorded in September 2025, though above the 24.1% average observed in March 2026.

Meanwhile, the TRU Out of the Population (TRU OOP)—the percentage of the total U.S. population that is functionally unemployed—rose 0.4 percentage points to 53.6%, reflecting a larger decline in labor force participation. Particularly notable was the increase in functional unemployment for prime-age workers (ages 25-54), which increased 0.7 percentage points to 17.9%.

By demographic, the TRU for Black workers increased 0.2 percentage points, to 27.3%, while the TRU for Hispanic workers decreased by 0.7 percentage points, to 28.2%. The TRU for White workers increased slightly (0.1 percentage points) to 23.2%.

Among women, functional unemployment increased 0.6 percentage points, to 29.4%, while the rate for men fell 0.4 percentage points, to 20.4%.

"Over the past three months, functional unemployment has remained below the levels we saw late last year, but June's data provide a reminder that progress is not always linear," said Ludwig. "The increase in functional unemployment among prime-age workers is particularly noteworthy. It's only one month's data, but it's a reading that deserves close attention."

About TWE
LISEP issues the TWE quarterly following the release of the BLS Median Weekly Earnings report. The full white paper, "Understanding the Status of American Workers Through Analysis of Current Population Data," can be viewed here. The TWE rate and supporting data are available on the LISEP website at https://www.lisep.org/twe.

About LISEP
The Ludwig Institute for Shared Economic Prosperity (LISEP) was created in 2019 by Ludwig and his wife, Dr. Carol Ludwig. The mission of LISEP is to improve the economic well-being of middle- and lower-income Americans through research and education. LISEP's original economic research includes new indicators for unemployment, earnings, and cost of living. These metrics aim to provide policymakers and the public with a more transparent view of the economic situation of all Americans, particularly low- and middle-income households, compared with misleading headline statistics. On X: @LISEP_org.

About Gene Ludwig
In addition to his role as LISEP chair, Gene Ludwig is a managing partner of Canapi LLC, a financial technology venture fund. He is the founder and CEO of Ludwig Advisors, which counsels financial firms on critical matters. Ludwig is also the founder of the Promontory family of companies. He is the former vice chairman and senior control officer of Bankers Trust New York Corp. and served as the U.S. Comptroller of the Currency from 1993 to 1998. He is also author of the book The Vanishing American Dream, which investigates the economic challenges facing low- and middle-income Americans. His new book, The Mismeasurement of America, was published September 2025 and is now available online or wherever books are sold. On X: @geneludwig.

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SOURCE Ludwig Institute for Shared Economic Prosperity