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

Market for jobs paying above poverty wages continues to weaken

August 13, 2025

For Immediate Release

WASHINGTON, D.C. — 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.”

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

Market for jobs paying above poverty wages continues to weaken

‍Jim Gardner

August 13, 2025

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.

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%

Press Contact:

‍Jim Gardner

press@lisep.org

(573) 680-1822

Additional Resources:

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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 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

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.