'Functional Unemployment' Hits Highest Level Since 2021, Says Ludwig Institute

One-in-four workers now unable to find full-time jobs paying above poverty wages

WASHINGTON, Jan. 22, 2026 /PRNewswire/ -- More than a quarter of the workforce is now considered "functionally unemployed," marking the highest level since June 2021, according to a report from the Ludwig Institute for Shared Economic Prosperity (LISEP).

LISEP's December True Rate of Unemployment (TRU) report—a measure of the functionally unemployed, defined as the jobless, those seeking but unable to find full-time employment, and those earning poverty-level wages—increased 0.4 percentage points, from 24.8% to 25.2%. This marks the highest TRU since June 2021, when it reached 25.3%, and stands 1.2 percentage points higher than a year ago. While the Bureau of Labor Statistics (BLS) reported a 0.1 percentage point decrease in the official unemployment rate for December, from 4.5% to 4.4%, the unemployment rate remains at its highest level since October 2021.

"Looking beyond monthly fluctuations, the broader labor market trends warrant close attention," said LISEP Chair Gene Ludwig. "The share of workers who are functionally unemployed has risen over the past year and returned to post-pandemic highs, pointing to ongoing challenges in access to full-time, living-wage employment."

By demographic, the TRU for Black workers rose 1.5 percentage points in December, to 29.6%. The average TRU for Black workers in 2025 was 27.8%, up 0.8 percentage points from 2024. The TRU for Hispanic workers also increased by 1.5 percentage points in December, from 27% to 28.5%, while the TRU for White workers fell slightly, from 23.3% to 23.2%. In 2025, average TRU levels increased modestly for both Hispanic and White workers—to 28.2% and 23.2%, respectively—reflecting smaller annual increases of 0.2 percentage points.

By gender, the TRU for men increased 0.3 percentage points in December, to 20.5%, while the rate for women increased 0.2 percentage points, to 30.3%.

"The data point to a labor market that has become increasingly static," Ludwig said. "Low hiring is making it harder for new entrants to find work, contributing to higher functional unemployment. At the same time, persistently elevated functional unemployment rates for Black and Hispanic workers denote a higher prevalence of low wages and part-time work. While monthly demographic data can be volatile, these trends warrant careful attention as they evolve."

About TRU
LISEP issued the white paper "Measuring Better: Development of 'True Rate of Unemployment' Data as the Basis for Social and Economic Policy'' upon announcing the new statistical measure in October 2020. The paper and methodology can be viewed here. LISEP issues TRU one to two weeks following the release of the BLS unemployment report, which occurs on the first Friday of each month. The most recent TRU and supporting data are available on the LISEP website at https://www.lisep.org/tru.

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