Nearly a quarter of Americans are “functionally unemployed,” according to a new report from the Ludwig Institute for Shared Economic Prosperity (LISEP).
The report revealed a True Rate of Unemployment (TRU) of 24.3% in May 2025, a slight increase from 24.2% in April. This contrasts with the U.S. Bureau of Labor Statistics’ official unemployment rate of 4.2%, which has remained unchanged over the same period.
LISEP’s TRU measures the percentage of the U.S. labor force without full-time jobs of at least 35 hours per week who want them, those without jobs, or those earning less than $25,000 annually before taxes — classified as “functionally unemployed.”
“The percentage of American workers unable to secure full-time, above-poverty-wage jobs continues to tick upward,” the report stated.
Unlike the BLS rate, which counts someone as employed if they worked one hour in the prior two weeks, LISEP’s measure aims to capture labor market nuances, including those in poverty-wage jobs or seeking full-time work.
“The unemployment data, as it’s put out, has some flaws,” LISEP Chairman Gene Ludwig said, per CBS News. “For example, it counts you as employed if you’ve worked as little as one hour over the prior two weeks. So you can be homeless and in a tent community and have worked one hour and be counted, irrespective of how poorly-paid that hour may be.”
He added, “If you’re part time and can’t get a full-time job, then we count you as functionally unemployed. We also count as functionally unemployed people who don’t earn above a poverty wage.”
The report highlighted disparities, with 29.9% of female workers, 27.3% of Hispanic workers, and 26% of black workers classified as functionally unemployed, compared to 23.6% of white workers and 19.3% of male workers.
“You don’t have anything that gets you to the first rung of the American dream ladder. You’re in survival mode,” Ludwig said, noting that these workers struggle to afford housing, nutritious meals, and savings.
LISEP’s analysis also showed regional variations, with Madison, Wisconsin, ranking as the top metro city for functional employment, driven by “robust job growth, higher wages, and the ability to secure desired hours.” The city’s TRU rate for May was 16.1%.
In contrast, McAllen, Texas, had a functional unemployment rate over 45%.
“The TRU by MSA analysis is vital for understanding regional economic distinctions,” Ludwig said, per Audacy. “It provides an unvarnished look at the realities for low- and middle-income families across localities, moving beyond anecdotal impressions to highlight exactly where regions are thriving or struggling.”
LISEP’s report, which began tracking TRU in 2020, argues that the BLS rate “presents a very incomplete and, in many ways, misleading picture,” potentially leading to poor policy decisions.
“If you say there’s 4.2% unemployment, which makes political folks happy because it’s a low number, it causes all kinds of poor policy decisions and assumes we are better off than we are,” Ludwig said, CBS reported.
The institute’s findings, derived from the BLS Current Population Survey, also revealed that low-income households earned an average of $38,000 in 2023 but needed $67,000 for a minimal quality of life, including professional clothing and basic leisure activities.