‘Functional Unemployment’ Increases in May, Says Ludwig Institute

For fourth straight month, more than 24% of labor force is functionally unemployed

June 18, 2025

For Immediate Release

WASHINGTON, D.C. — The percentage of American workers unable to secure full-time, above-poverty-wage jobs continues to tick upward, with nearly one-fourth now classified as “functionally unemployed,” according to the latest report from the Ludwig Institute for Shared Economic Prosperity (LISEP).

LISEP’s May True Rate of Unemployment (TRU) report—a measure of the functionally unemployed, defined as the jobless plus those seeking, but unable to find, full-time employment and those in poverty-wage jobs—increased from 24.2% to 24.3%, while the official Bureau of Labor Statistics rate was unchanged at 4.2%. The functional unemployment rate has remained at 24% or higher since February.

“Over the past four months, we’ve seen a stagnation in job opportunities that pay above poverty wages, particularly for low- and middle-income workers,” said LISEP Chair Gene Ludwig. “As economic uncertainty grows, more Americans are losing ground. Wages aren’t keeping up with the rising cost of living, and the shrinking availability of living-wage jobs is compounding the strain. The consequences for working families are becoming increasingly severe.”

Across demographics, the functional employment prospects were somewhat mixed in May. Men, Black, and Hispanic workers saw improvements relative to April, while women and White workers experienced an increase in functional unemployment. The TRU for Black workers fell by 0.7 percentage points to 26%, partially offsetting the 1.4 percentage point jump in April. While the TRU for Black workers is slightly lower than in early 2024, it remains higher than in early 2023, which experienced the best levels on record.

The TRU for Hispanic workers fell by 0.8 percentage points to 27.3%, dropping below their 12-month average of 27.8%. In contrast, the TRU for White workers increased by 0.5 percentage points to 23.6%, marking the fourth consecutive month with a TRU above 23%.

By gender, the TRU for women increased 1.3 percentage points to 29.9%, while the rate for men decreased 0.7 percentage points to 19.3%. Overall, the three-month average gender gap has returned to 10 percentage points.

“Identifying trends is key in determining the direction of the economy, and unfortunately, for low- and middle-income workers, the trends are not encouraging,” Ludwig said. “The TRU, and its stark contrast with government headline statistics, tells us American workers are facing greater challenges than what we are led to believe.”

‘Functional Unemployment’ Increases in May, Says Ludwig Institute

For fourth straight month, more than 24% of labor force is functionally unemployed

‍Jim Gardner

June 18, 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:

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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 the 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 the author of the book The Vanishing American Dream, which investigates the economic challenges facing low- and middle-income Americans. His forthcoming book, The Mismeasurement of America, will be published in September 2025 and is available for pre-order wherever books are sold. On X: @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.