A new report has warned that nearly a quarter of the American workforce is “functionally unemployed,” and that lower, headline figures may be masking a deeper structural crisis within the labor market.
According to the report from the Ludwig Institute for Shared Economic Prosperity (LISEP), 24.8 percent of workers fall into this category as of November, including those who are jobless, Americans seeking but unable to secure full-time employment, and individuals earning “poverty wages,” defined as $26,000 or less annually. LISEP’s “True Rate of Employment”—or TRU—is down 0.1 percent from September, the time of its last report, but has risen 0.7 percent over the past 12 months.
Newsweek has contacted the Ludwig Institute for further comment on the research.
Why It Matters
While some experts have questioned its methodology and the utility of the figures this produces, the Ludwig Institute argues that its measurement of functional unemployment and the resulting TRU provides a more holistic and useful view of employment conditions than the “deceiving” government figures relied on by analysts and policymakers.
What To Know
The latest employment report from the Bureau of Labor Statistics (BLS)—released in mid-December following a lengthy delay caused by the government shutdown—revealed that the U.S. economy added 64,000 jobs in November as the unemployment rate edged up to 4.6 percent, the highest level since September 2021.
LISEP, which relies on BLS survey data for its calculations, said the roughly 20-point gap between this official number and its own “functional unemployment” rate reflects the incorporation of workers who want but cannot secure full-time employment, as well as adjustments for poverty-level incomes.
By demographic, the research group said that the TRU remains notably higher for Black and Hispanic workers—28.1 percent and 27 percent, respectively—compared to 23.3 percent for White workers. Additionally, a greater share of women are “functionally unemployed”—their TRU increasing to 30.1 percent in November while men saw a slight decline to 20.2 percent.
Experts who spoke to Newsweek following a previous report from LISEP expressed doubts about the usefulness of its statistics. Labor economist David Card noted that the BLS tracks and publishes many underlying figures beyond pure unemployment that can be used for a better understanding of labor market conditions.
“It is useful to keep track of poverty rates and various measures of unemployment and lots of other indicators,” he said. “Whether they should be combined in a single index is unclear.”
However, LISEP Chair Gene Ludwig said both the organization’s figures and those released by the BLS point to the same conclusion, underscoring how much “less forgiving” the labor market has become in the U.S.
Jobs growth has remained sluggish in 2025, and a string of mass layoffs late in the year appears to have upset the “low hire, low fire” equilibrium Federal Reserve Chair Jerome Powell described in September. According to the latest employment report from the outplacement firm Challenger, Gray & Christmas, U.S.-based employers announced 71,321 job cuts in November, up 24 percent year-over-year and bringing 2025’s total to nearly 1.2 million, the highest level since 2020.
What People Are Saying
LISEP Chair Gene Ludwig wrote in Wednesday’s report: “With the official unemployment rate at its highest level since 2021 and functional unemployment remaining elevated, many households are feeling the effects of a labor market that has grown less forgiving. Stagnant wages and elevated prices for basic necessities continue to stretch household budgets, pressures that tend to be felt most acutely during the holiday season.”
What Happens Next
The Department of Labor will release its employment report for December on January 9, with forecasts from Trading Economics pointing to another slow month for hiring and a slight increase in the unemployment rate to 4.7 percent.
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