'Functional Unemployment' Improves But Wages Down, Says Ludwig Institute

Wages stagnate over the year despite lower functional unemployment rate in Q1

WASHINGTON, April 16, 2026 /PRNewswire/ -- "Functional unemployment" improved across all demographics in March, alongside a drop in labor force participation rates. Median weekly wages for Q1, however, fell year over year, according to the Ludwig Institute for Shared Economic Prosperity (LISEP).

LISEP issued its March True Rate of Unemployment (TRU) alongside its Q1 2026 True Weekly Earnings (TWE) report. The TRU is a measure of the "functionally unemployed"—defined as the jobless, the involuntarily part-time, plus those earning a poverty wage. The TWE is a measure of median weekly earnings (adjusted for inflation) for all members of the workforce, including part-time workers and those seeking work.

In March, the TRU fell 1.1 percentage points, from 24.7% to 23.6%, compared to a 0.1 percentage point decrease in the BLS headline unemployment rate, to 4.3%. Over the past three months, the TRU has averaged 24.1%—largely unchanged from 24.2% a year ago.

"March's improvement is a positive development, but the back-and-forth we've seen in recent months makes clear that this is not yet a stable trend," said LISEP Chair Gene Ludwig. "We need to look beyond headline improvements to understand whether workers are finding better jobs or simply leaving the workforce."

By demographic, the TRU for Black workers improved by 3.1 percentage points in March, to 25.7%, while the TRU for Hispanic workers decreased by 1 percentage point, to 27.1%. The TRU for White workers fell 0.5 percentage points, to 22.4%. The TRU for men fell 0.3 percentage points, to 18.6%, while the rate for women improved by 1.3 percentage points, to 29.3%.

Wages, however, weakened for low- and middle-income workers. The overall TWE was $1,018 in Q1 2026 (inflation-adjusted), down 0.9%, since Q1 2025—in contrast to the BLS headline rate of $1,235, a 0.7% increase over the past year. Quarter-over-quarter comparisons are unavailable due to the government shutdown in October 2025, which led to a suspension of BLS data collection.

By demographic group, wage trends were uneven. Black and Asian workers saw declines in median weekly earnings compared to a year ago, while Hispanic and White workers posted gains. TWE for Black workers fell 3.5% to $851, and for Asian workers declined 3.5% to $1,265. In contrast, Hispanic workers saw a 2.6% increase, from $818 to $840, while White workers experienced a 1.1% gain, from $1,151 to $1,163.

Differences also emerged by gender. The TWE for men improved 2.2% year-over-year, from $1,159 to $1,185, while the TWE for women declined 1.7%, dropping from $919 to $903. Consequently, the TWE gender pay gap widened, with women earning 76.2 cents for every dollar earned by men, down from 79.2 cents a year ago.

Across the income distribution, lower earners continued to lose ground. Median weekly earnings for the 25th percentile of earners fell 0.9% to $620, marking a 1.7% decline from their Q1 2023 peak and a return to Q1 2022 levels after three consecutive years of erosion. TWE for the 75th percentile rose 0.7%, from $1,734 to $1,722, while the 90th percentile is virtually unchanged (down 0.1%, from $2,477 to $2,744).

"Employment gains mean little if they are not accompanied by rising, sustainable wages," said Ludwig. "The continued decline in earnings among lower-income workers—alongside widening gaps by gender and across the income distribution—underscores how uneven this economy remains."

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 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.

SOURCE Ludwig Institute for Shared Economic Prosperity