'Functional Unemployment' Rises; Black, Hispanic Workers Take Biggest Hit, Says Ludwig Institute

Market for jobs paying above poverty wages continues to weaken

WASHINGTON, Aug. 13, 2025 /PRNewswire/ -- Prospects for workers seeking jobs paying above poverty wages worsened in July, particularly for Black and Hispanic earners, according to the latest report from the Ludwig Institute for Shared Economic Prosperity (LISEP).

LISEP's July 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 0.6 percentage points, from 24.1% to 24.7%, in contrast with the Bureau of Labor Statistics official rate, which increased only 0.1 percentage points to 4.2%. The functional unemployment rate has now remained at 24% or higher for six consecutive months, which marks a higher level than at the end of 2024.

Additional signs of weakness in the labor market include a rise in the True Rate of Unemployment Out of the Population—a measure of functional unemployment for the entire working age population—reflecting a decline in labor force participation, both month-over-month and year-over-year. In addition, the TRU for prime-age workers (25-54) increased by 0.4 percentage points, from 17.3% to 17.7%. 

"With good-paying job opportunities waning, low- and middle-income households continue to feel the pressure on multiple fronts—from stubborn inflation to the rising cost of basic necessities, ultimately eroding wage growth," said LISEP Chair Gene Ludwig. "Meanwhile, economic policymakers have been slow to react, and it all comes down to headline statistics that do not accurately reflect what's going on in the lives of working Americans."

The 0.6 percentage point increase in the national functional unemployment rate was driven by an increase in the TRU for Black and Hispanic workers, with both posting their highest levels since 2021. The rate for Black workers rose a full percentage point, to 28.9%, while the TRU for Hispanic workers increased 1.7 percentage points, to 29.5%. The rate for White workers remained steady, dropping 0.1 percentage points, to 22.6%. Year-over-year, the TRU has worsened for Black and Hispanic workers but improved for White workers.

By gender, the TRU increased for men by 1 percentage point, to 20.6%, while the rate for women remained stable with a 0.1 percentage point improvement, falling to 29.5%

"Often our TRU reports will indicate winners and losers for any given month, but for June, there are really no winners," Ludwig said. "Low- and middle-income workers and their families continue to struggle, with this recent rise in functional unemployment adding an additional strain. Further erosion is unsustainable"

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. 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.

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SOURCE Ludwig Institute for Shared Economic Prosperity