A Deep Dive into America's Functional Unemployment Rate and Its Impacts on Workers

Understanding Functional Unemployment in America

The employment landscape in the United States is undergoing a significant transformation that can’t be overlooked. A recent report published by the Ludwig Institute for Shared Economic Prosperity (LISEP) has shed light on a concerning trend—approximately 25% of American workers are classified as ‘functionally unemployed.’ This term not only encompasses those without jobs but also includes individuals seeking full-time employment yet unable to secure adequate hours and those earning insufficient wages, defined as salaries below $26,000 annually (in 2025 dollars).

The Current State of Employment

As of November 2025, LISEP's True Rate of Unemployment (TRU) stands at 24.8%, reflecting a slight decline of 0.1 percentage points from September but an increase of 0.7 points from the same month last year. In contrast, the official federal jobless rate rests at 4.6%, marking the highest figure since September 2021. This disparity is alarming, indicating systemic issues within the labor market that require urgent attention.

Demographic Disparities

Breaking down the numbers further reveals that the functional unemployment rate is disproportionately affecting specific demographics. For instance, Black workers face a TRU of 28.1%, while Hispanic workers experience a TRU of 27%. In comparison, the TRU for White workers is lower at 23.3%. These statistics highlight racial inequalities in the labor market, with Black workers witnessing a rise in functional unemployment by 0.4 points between September and November, while Hispanic and White workers saw slight decreases in their TRUs.

Moreover, gender dynamics play a crucial role as well. The TRU for women has climbed to 30.1%, while it has slightly decreased for men to 20.2%. Interestingly, despite a similar official unemployment rate of 4.5% for women and 4.6% for men in November, the experience of joblessness and underemployment is distinctly harsher for women.

Economic Pressures and Family Budgets

The implications of this elevated level of functional unemployment are particularly pronounced as families face economic pressures during the holiday season. LISEP Chair Gene Ludwig warns that with rising prices for essential goods and stagnant wages, many households are feeling squeezed financially. The holiday period, usually marked by spending, may be challenged by the prevailing economic realities, forcing families to rethink budgeting and spending habits.

These findings provoke further questions regarding the adequacy of current labor policies and economic measures. As the U.S. grapples with these rising functional unemployment figures, the need for comprehensive social and economic policies becomes increasingly urgent.

The Role of LISEP

LISEP is pioneering a new approach to assessing unemployment and economic vitality. Their white paper titled "Measuring Better Development of 'True Rate of Unemployment' Data as the Basis for Social and Economic Policy" aims to reframe discussions around employment statistics. By providing a more detailed overview of who is struggling in the labor market, LISEP envisions a path toward more effective policy-making aimed at improving the economic situation for middle- and lower-income households.

Founded in 2019 by Gene Ludwig and Dr. Carol Ludwig, the institute focuses on research and education to bolster economic improvement. The TRU metric, introduced in October 2020, serves as a crucial tool for unveiling the essence of America’s labor challenges, especially for those marginalized in the economy.

Conclusion

As we navigate the complexities of today’s economic landscape, understanding the facets of functional unemployment is vital. The alarming rates presented by the LISEP report should serve as a clarion call for policymakers to address these systemic issues head-on. With awareness and targeted action, there is hope to improve the employment outlook for struggling communities and foster a more equitable labor market for all Americans.