'Functional Unemployment' Jumps 1.3 points in February, Says Ludwig Institute

Higher proportion of earners working part-time involuntarily or for poverty wages 

WASHINGTON, March 19, 2025 /PRNewswire/ -- The number of functionally unemployed workers surged by 1.3 percentage points in February—one of the largest monthly increases in 30 years—despite an official jobless rate that remained largely unchanged, according to the latest True Rate of Unemployment (TRU) report from the Ludwig Institute for Shared Economic Prosperity (LISEP).

The February TRU—a measure of the functionally unemployed, defined as the jobless plus those seeking, but unable to find, full-time employment paying above poverty wages ($25,000 a year in 2024 dollars) after adjusting for inflation—rose from 23.3% to 24.6%. This increase reversed five months of progress for White workers, whose TRU climbed 1.6 percentage points (21.6% to 23.2%). Meanwhile, Hispanic workers saw a slight improvement, dropping from 28.4% to 28.1%, and Black workers experienced a more notable decline, dropping from 27.8% to 26%.

The increase in the TRU is in sharp contrast to official unemployment data released by the U.S. Bureau of Labor Statistics (BLS), which reported only a 0.1 percentage point increase, to 4.1%. Even the BLS' broader measure of unemployment, which accounts for underemployed part-time workers, rose by just 0.5 percentage points. While this explains part of the jump in the TRU, it does not capture a key factor: more full-time workers fell below the poverty wage threshold last month.

"A one-month spike alone isn't cause for alarm, but a jump of this magnitude is concerning—especially given broader economic uncertainty," said LISEP Chair Gene Ludwig. "Sustained increases in functional unemployment would signal real trouble for low- and middle-income Americans, many of whom are already struggling to make ends meet.

"We'll be watching closely in the months ahead to see whether this is an anomaly or the start of a more troubling trend."

Functional unemployment rose for both men and women, increasing by 1.2 percentage points—climbing from 19% to 20.2% for men and from 28.1% to 29.3% for women. However, the decline in functional employment was more pronounced for men, as their labor force participation rate fell by 0.4 percentage points, while it remained unchanged for women.

"While February's TRU spike may be a blip, it captures a snapshot of real economic hardship that's unfolding now," Ludwig said. "The disconnect between official metrics and lived experiences should prompt a closer look at how the economy is really working for everyday Americans."

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. On X: @geneludwig.

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SOURCE Ludwig Institute for Shared Economic Prosperity