Functional Unemployment Edges Higher Amid Signs of Labor Market Weakness, Says Ludwig Institute

Workforce participation drops as Black workers face sharpest increase

May 20, 2026

For Immediate Release

WASHINGTON, D.C. — Functional unemployment rose in April even as the broader trend remained modestly improved from a year ago, with Black workers seeing a sharp monthly increase and labor force participation continuing to decline, according to the Ludwig Institute for Shared Economic Prosperity (LISEP).

LISEP’s April True Rate of Unemployment report — a measure of the “functionally unemployed,” defined as the jobless, the involuntarily part-time, and those earning a poverty wage — increased 0.5 percentage points, from 23.6% to 24.1%. Despite the month-over-month increase, however, the three-month average of 24.1% remains improved from the 24.5% average of a year ago.

By comparison, the official Bureau of Labor Statistics (BLS) jobless rate remained steady at 4.3%, while the broader U-6 measure — which includes unemployed workers, discouraged workers, and those working part-time for economic reasons — rose to 8.2% from 7.8% a year earlier. Also notable is the continued decrease in labor force participation, down 0.3 percentage points since January, alongside an increase in workers who are involuntarily part-time due to slack.

“While labor market conditions have generally improved since late 2025, this month’s report points to areas of continued strain, particularly the decline in workforce participation and the growing number of workers relying on part-time employment ,” said LISEP Chair Gene Ludwig. “The broader trend may be moving in the right direction, but too many workers are still struggling to find stable footing in today’s economy. ”

By demographic, Black workers saw a notable increase in April, rising 3.6 percentage points, from 25.7% to 29.3%. The TRU for Hispanic workers increased 0.6 percentage points, from 27.1% to 27.7%. Meanwhile, the TRU for White workers improved in April, dropping from 22.4% to 21.8%, while the three-month average TRU for White workers remained down 0.7 percentage points since January and a full percentage point lower than a year ago.

By gender, the TRU for women improved from 29.3% to 28.9%, while the rate for men increased from 18.6% to 19.3%. Although the gender gap improved in April, the gap has widened by a full percentage point year over year, based on the last three months of data.

“Low- and middle-income workers continue to feel pressure from the rising cost of basic necessities, particularly essentials like food and gas,” Ludwig said. “And while labor market conditions have generally improved since last year, many workers are still facing the lingering effects of a looser job market and slower income growth. Rising everyday costs continue to fall hardest on lower-wage households.”

Functional Unemployment Edges Higher Amid Signs of Labor Market Weakness, Says Ludwig Institute

Workforce participation drops as Black workers face sharpest increase

‍Jim Gardner

May 20, 2026

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:

TRU White Paper

TRU & TWE Methodology

TRU & TWE Source Data

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 latest book, The Mismeasurement of America, released in September 2025, is now available 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.