Employment researchers say a growing share of Americans are only loosely connected to the labor force—and that the true level of joblessness and economic insecurity may be far higher than the official unemployment rate indicates.
A new report from the Ludwig Institute for Shared Economic Prosperity (LISEP) estimates that 25.2% of the U.S. workforce is now “functionally unemployed.” In LISEP’s definition, that includes people who are jobless, those seeking work but unable to land full-time employment, and workers earning what it considers poverty-level wages. The figure is up from 24.8% in November, and LISEP says it is the highest level of its “True Rate of Unemployment” (TRU) measure since June 2021.
LISEP Chair Gene Ludwig said the month-to-month changes matter less than the broader pattern. “Looking beyond monthly fluctuations, the broader labor market trends warrant close attention,” he said, arguing that the share of workers struggling to access full-time, living-wage jobs has increased over the past year.
Why it matters
Some economists have questioned LISEP’s methodology and whether TRU should be treated like a standard indicator. LISEP argues that tracking underemployment and poverty-wage work highlights stress that can be missed when the labor market is judged mainly by whether someone has any job.
In past comments to Newsweek, Ludwig framed the measure as a shift in focus—from “are people employed, however minimally?” to whether they have enough steady work and pay to maintain a basic standard of living.
What to know
The latest employment report from the Bureau of Labor Statistics (BLS) showed the economy added 50,000 jobs in December, after a 56,000 gain the month before. The official unemployment rate edged down to 4.4% from a revised 4.5% in November, while the number of unemployed people held roughly steady at 7.5 million.
LISEP contends those headline figures can mask hardship among workers who are stuck in very low-wage jobs or forced into reduced hours. The group argues that defining success as simply “having a job”—even one that provides minimal hours—risks overlooking structural problems policymakers may need to address.
Demographic breakdown
LISEP said its TRU rose in December for Black and Hispanic workers—up 1.5 percentage points for each group to 29.6% and 28.5%, respectively—while the rate for white workers dipped slightly to 23.2% from 23.3%.
By gender, LISEP reported that the share of men it considers functionally unemployed increased 0.3 percentage points to 20.5%, while the rate for women rose to 30.3% from 30.1%.
What people are saying
In comments to Newsweek, Ludwig emphasized that the longer trend is the key signal: TRU has moved higher over the past year alongside the official unemployment rate, he said, suggesting many low- and middle-income workers aren’t seeing slower job growth offset by stronger wages or improved hours. He also pointed to rising joblessness among younger workers and an increase in involuntary part-time work—signs, in his view, of a labor market cooling from its post-pandemic peak.
What happens next
Many forecasters expect the forces that shaped the 2025 labor market—soft hiring and elevated announcements of job cuts—to continue into 2026. Surveys have also shown limited confidence about employment conditions in the months ahead, reinforcing expectations of a cautious start to the year.
