Functional Unemployment Increases as Labor Market Shows Signs of Weakness

In an unsettling report from the Ludwig Institute for Shared Economic Prosperity (LISEP) as of May 20, 2026, functional unemployment has crept upwards in April despite an overall modest improvement compared to a year ago. The latest findings indicate that certain demographic groups, especially Black workers, have experienced a significant rise in unemployment rates.

The institute released its April True Rate of Unemployment report, which is often cited for measuring the “functionally unemployed.” This category encompasses not just those entirely unemployed, but also individuals working part-time involuntarily and those earning a wage insufficient to meet basic living standards. The report highlights an increase of 0.5 percentage points, bringing the functional unemployment rate from 23.6% to 24.1%. Surprisingly, although this marks a monthly increase, the three-month average remains slightly better than the same period last year, when it was at 24.5%.

In stark contrast, the official Bureau of Labor Statistics (BLS) reported that the standard jobless rate held steady at 4.3%. However, a broader measure from the BLS, termed U-6, which includes discouraged workers and those working part-time for economic reasons, saw an increase from 7.8% to 8.2% year-over-year. Another concerning aspect of the report was the persistent decline in labor force participation, which fell by 0.3 percentage points since January. This trend reveals a growing number of workers forced into part-time employment due to a lack of opportunities in the full-time job market.

Gene Ludwig, the chair of LISEP, emphasized this month’s report, stating, “While labor market conditions have generally improved since late 2025, this month's findings spotlight persistent struggles, particularly the drop in workforce participation as well as the increasing prevalence of part-time employment on an involuntary basis.” This commentary suggests that while overall trends may show positive movement, many individuals still face severe difficulties in securing stable and sufficient employment.

When evaluating the findings by demographic categories, the report revealed that Black workers faced the steepest rise in functional unemployment, surging by 3.6 percentage points from 25.7% to a troubling 29.3%. Hispanic workers also reported a marginal rise of 0.6 percentage points, moving from 27.1% to 27.7%. Conversely, the rate for White workers improved, falling from 22.4% to 21.8%, indicating a 0.7 percentage points decrease from January. The data shows a full point decrease compared to last year.

Furthermore, the report outlines disparities between genders—while women saw a slight improvement in their functional unemployment rate from 29.3% to 28.9%, men’s rate increased from 18.6% to 19.3%. Although the gender gap narrowed this month, it has widened by a full percentage point when analyzed over the past year.

Low- and middle-income workers are under increasing pressure due to the escalating costs associated with basic necessities such as food and gas. Ludwig pointed out, “While labor market conditions have shown broader improvement since last year, many workers are still battling the residual impacts of a slack job market coupled with stagnated income growth. The rising costs of everyday living continue to disproportionately affect lower-wage households.” These insights shed light on the multi-faceted challenges facing American families today, particularly for those in lower-income brackets navigating this uncertainty.

LISEP's methodology for producing such statistics was established in a white paper titled "Measuring Better Development of 'True Rate of Unemployment' Data as the Basis for Social and Economic Policy'' published in October 2020. The institute releases the True Rate of Unemployment (TRU) a week or two after the BLS unemployment report, which is routinely published on the first Friday of each month. Those interested can find further TRU statistics and relevant data on their website.

Founded in 2019 by Gene Ludwig and his wife, Dr. Carol Ludwig, the Ludwig Institute aims to enhance the economic welfare of middle- and lower-income Americans through comprehensive research and educational initiatives. LISEP is dedicated to offering a clearer perspective on the economic landscape, especially for those adversely affected by misleading headline statistics. Gene Ludwig, who has an extensive background in finance and public policy, continues to advocate for the economic interests of the underrepresented communities in his various roles, including being a prominent author on economic challenges.

As economic landscapes evolve, the data from LISEP serves as critical insight into the continuous challenges in maintaining equitable labor market conditions for all demographics. With functional unemployment rising sharply for Black workers and escalating costs of living challenging families, there is an urgent need for targeted policy solutions to create sustainable employment opportunities in the U.S.