Slight Improvement in Q3 Wages, September Functional Unemployment, Says Ludwig Institute

Despite overall improvements, Black workers see lower wages, higher functional unemployment

WASHINGTON, Oct. 22, 2026 /PRNewswire/ -- Functional unemployment inched downward overall for the second consecutive month in September, alongside a slight improvement in third-quarter real median weekly earnings, although Black workers experienced a decline in wages and an increase in functional unemployment, according to the Ludwig Institute for Shared Economic Prosperity (LISEP).

LISEP has issued its September True Rate of Unemployment (TRU) and Q3 2026 True Weekly Earnings (TWE) reports. The TRU measures the "functionally unemployed"—those who are jobless, working involuntarily part-time, or earning a poverty wage (defined as annual earnings below $26,000 in 2025 dollars). The TWE measures inflation-adjusted median weekly earnings across the entire workforce, including part-time workers and those unemployed but seeking work.

Overall, the inflation-adjusted median TWE increased 0.6% from Q2 to Q3, from $1,035 to $1,041, but did not meaningfully change from a year ago. By comparison, the Bureau of Labor Statistics' (BLS) median earnings measure—which includes only full-time workers—reports weekly earnings at $1,232, 1.5% lower than the $1,251 reported a year ago. The difference largely reflects earnings trends among part-time workers, which can diverge from those of full-time workers but are not captured in the BLS headline metric.

The TWE improved for lower-wage earners (25th percentile) both quarter over quarter and year over year, rising 1.3% in Q3 to $643, a 1% increase from a year ago. Earnings at the 75th and 90th percentile both declined. At the 75th percentile, weekly earnings fell 0.5% over the quarter and 2.1% over the year to $1,735. At the 90th percentile, weekly earnings declined 1.9% year over year to $2,723.

By demographic, Black workers saw median weekly earnings increase 0.5% year over year but declined 0.6% from last quarter to $866. Hispanic workers saw strong wage gains in Q3, up 1.7% to $868—and a 3.4% increase year over year. White and Asian workers both experienced declines in earnings over the past year. Asian workers saw earnings fall 1.8% over the quarter and 2.2% year over year to $1,352. For white workers, weekly earnings rose 0.7% in Q3 to $1,177 but remained 0.9% below year-ago levels.

The gender pay gap narrowed somewhat in Q3, with the TWE for men down 0.7% to $1,175 while earnings for women increased 1.5% to $934. Women are now earning 80 cents for every dollar earned by men.

"The wage gains we saw this quarter may have helped bring some workers back to roughly where they were a year ago but that doesn't necessarily mean they're better off," said LISEP Chair Gene Ludwig. "The cost of living certainly hasn't stood still, and for too many Americans making ends meet remains a real challenge. We need to see more than a quarter or two of improvement. We need wages that allow more Americans to get ahead, not just keep up."

Functional unemployment also showed signs of improvement in September, declining for the second consecutive month after several months of signs of labor market strain. The TRU fell 0.3 percentage points to 24%, reversing much of the increase from earlier this year, but it remains higher than the March rate of 23.6%.

By demographic, the TRU for Black workers rose sharply, up 2.9 percentage points to 30.1%—the highest level since July 2021. This increase was also reflected in the BLS headline unemployment rate, which rose a full percentage point, from 6% to 7%. Meanwhile, the TRU for Hispanic workers fell 1.7 percentage points to 25.5%, down 3.4 percentage points from a peak in May 2026 of 28.9%. The TRU for White workers fell 0.9 percentage points to 23.1%, the first decrease following four consecutive monthly increases from May to August.

Among women, functional unemployment fell 0.7 percentage points to 28.8%, while the rate for men increased 0.2 percentage points, to 19.8%.

"One of the things these numbers remind us is that there really isn't a single American labor market experience," said Ludwig. "We're seeing some improvement in functional unemployment and wages overall, but the picture can look quite different depending on where you sit in the workforce. The earnings trends for full- and part-time workers are a good example. That's why it's important to look beyond the headline numbers to understand how different groups of workers are actually doing."

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