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

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

October 22, 2026

For Immediate Release

WASHINGTON, D.C. — 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.”

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

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

‍Jim Gardner

October 22, 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.

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.

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%.

Press Contact:

‍Jim Gardner

press@lisep.org

(573) 680-1822

Additional Resources:

TRU & TWE Source Data

TRU & TWE Methodology

TRU White Paper

TWE White Paper

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 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 lisep.org/earnings.

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.