Functional Unemployment Moderates After Four Months of Increases, Says Ludwig Institute

August improvement partially reverses recent increases; rate remains above early-year level

WASHINGTON, Sept. 24, 2026 /PRNewswire/ -- Functional unemployment declined slightly in August, partially reversing four consecutive months of increases, according to the Ludwig Institute for Shared Economic Prosperity (LISEP). Despite the improvement, the rate remains higher than it was in January.

LISEP's August True Rate of Unemployment (TRU)—a measure of the "functionally unemployed," defined as the jobless, involuntarily part-time, and those earning a poverty wage—decreased by 0.6 percentage points, from 24.9% to 24.3%. The August rate remains slightly above January's 23.9%, following a 1.3-percentage-point increase from March through July. By comparison, the U.S. Bureau of Labor Statistics (BLS) headline unemployment rate remained unchanged in August at 4.1%.

LISEP's TRU Out of the Population (TRU OOP)—a measure of the percentage of the working-age population who are not functionally employed, including those who have dropped out of the labor force—also declined by 0.6 percentage points to 53.2%, consistent with the improving labor force participation rate reported by the BLS.

LISEP Chairman Gene Ludwig said the coming months will provide a clearer picture of whether that improvement is taking hold.

"We're pleased to see functional unemployment move in the right direction this month," Ludwig said. "What matters now is whether that improvement continues and, ultimately, whether more Americans are able to find the kind of work that provides real economic security for themselves and their families."

The TRU changed little for all racial demographic groups in August, with the TRU for Black workers decreasing 0.1 percentage points to 27.2%, and the rate for Hispanic workers increasing 0.4 percentage points, to 27.1%. Functional unemployment for White workers increased 0.2 percentage points, to 24.0%.

The August TRU for men increased 0.1 percentage points to 19.6%, while the rate for women dropped 1.6 percentage points, to 29.4%—a reversal from July, when the TRU for women rose 1.6 percentage points to 31.0%.

"One of the things we'll be watching is where the improvement is occurring and whether it becomes more broadly shared," Ludwig said. "The decline for women this month is encouraging, while the numbers changed relatively little across racial groups. A sustained improvement across workers would give us greater confidence in the direction of the labor market."

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 the 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.

SOURCE Ludwig Institute for Shared Economic Prosperity