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

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

September 24, 2026

For Immediate Release

WASHINGTON, D.C. — 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.

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

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

‍Jim Gardner

September 24, 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.

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

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.