‘Functional Unemployment’ Down in January But Higher Than a Year Ago, Says Ludwig Institute

Living-wage employment improves for White workers, worse for Black, Hispanic earners

February 20, 2025

For Immediate Release

WASHINGTON, D.C. — The “functional unemployment” rate improved by 0.4 percentage points in January, falling from 23.7% to 23.3% — but remains 0.3 percentage points higher than a year ago, according to the latest True Rate of Unemployment (TRU) report from the Ludwig Institute for Shared Economic Prosperity (LISEP).

The January 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 — showed very uneven trends across demographic groups, despite the overall improvement. The TRU for White workers improved for the fifth consecutive month, falling from 22.1% to 21.6% in January. However, the TRU for Black workers rose 2.1 percentage points (to 27.8%), and increased 0.4 percentage points for Hispanic workers (to 28.4%).

Based on an average of the last three months, the gap between Black and White workers is now five percentage points — the largest gap since August 2022. Similarly, the three-month average gap between Hispanic and White workers is 5.8 percentage points.

“The bottom line is that overall, things are not getting better,” said LISEP Chair Gene Ludwig. “Month-to-month fluctuations notwithstanding, the living-wage job market is worse than it was a year ago. This is not the formula for a successful economy.”

The TRU for women dropped 1.2 percentage points to 28.1%, while the TRU for men increased by 0.1 percentage points, to 19%. This is in contrast to the official headline unemployment rate issued by the U.S. Bureau of Labor Statistics, which pegs the jobless rate for both men and women at 4%. Based on the TRU, the three-month average gender gap now stands at 8.8 percentage points.

“While positive trends in January’s functional unemployment rate are welcome, certain groups of workers are not enjoying that same progress,” Ludwig said. “Low- and middle-income households remain economically vulnerable. It will take acknowledgment of this and appropriate economic policy to turn things around.”

‘Functional Unemployment’ Down in January But Higher Than a Year Ago, Says Ludwig Institute

Living-wage employment improves for White workers, worse for Black, Hispanic earners

‍Jim Gardner

February 20, 2025

For Immediate Release

Additional Resources

Historically, systemic barriers have disproportionately hampered Black farmers’ ability to retain land ownership.

Despite this tragic history, there is still time and economic incentive to set some of the inequities right.

In 2021, working mothers with children under 18 earned just 61.7 cents for every dollar a father made. Much wider than the overall gender wage gap, this difference highlights both the motherhood penalty and the fatherhood premium.

Female-dominated, low-paying, part-time occupations are overrepresented among informal workers who also have a formal job.

We need to create an economic environment where companies can hire these workers as employees and pay them a living wage. There are steps policymakers can take to change the gig economy dynamic.

Dependency on tips over base pay is growing because of actions taken by gig companies to institute tipping.

Even for those lucky enough to be making what amounts in many states to the poverty wage of $15 per hour, many will get nothing but a week’s notice before being out on the street.

One study shows that consistent involvement in extracurricular activities increased a child’s likelihood of attending college by a whopping 400% compared to not being involved at all.

Studies have found that both men and women are paid less if they work in “nurturant” occupations.

Since 2015, the correlation between LISEP’s functional employment to population ratio and the inflation rate was more than four times as strong as the BLS’s employment to population ratio, which is depicted in the graph below.

The employment to population ratio settles the discrepancy between what we see around us and what the data says.

The NBER paper defines employment using the traditional BLS U-3 rate. However, the often-used U-3 number fails to capture the quality of jobs.

Among states with stricter COVID-19 policies, reducing unemployment benefits had little to no effect. The average effect of increased employment seems to have occurred only in those states with looser COVID protocols.

Press Contact:

‍Jim Gardner

press@lisep.org

(573) 680-1822

Additional Resources:

TRU White Paper

TRU & TWE Methodology

TRU & TWE Source Data

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 TRU rate and supporting data are available on the LISEP website at lisep.org/tru.

About LISEP

The Ludwig Institute for Shared Economic Prosperity (LISEP) was created in 2019 by Gene 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 founder of the Promontory family of companies and 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 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 Twitter: @geneludwig.

Please Note:

The Ludwig Institute for Shared Economic Prosperity continuously revises and updates its data. As a result, data presented in this release may no longer reflect the latest estimates. Find the most current data at lisep.org.