The hidden job crisis: 25% of Americans are functionally unemployed and it's worse than it sounds

Economic Times

7 hours ago

The unemployment rate in America seems low. However, a new report suggests a different story. The Ludwig Institute says the 'true' unemployment rate is much higher. It includes people working part-time or earning low wages. Black and Hispanic workers are affected more. The institute hopes to provide a clearer picture of the economic situation. This helps policymakers make better decisions.
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The True Unemployment Rate Might Surprise You
How LISEP Measures Who's Really Employed
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Work full-time (35 or more hours per week)
Earn at least $25,000 annually before taxes
Why the Official Numbers Doesn't Show the Real Picture
Who's hit the hardest?
Black workers: 27% functionally unemployed
Hispanic workers: 28%
White workers: 23%
Women overall: more likely to be functionally unemployed than men
Why it matters
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At first glance, the U.S. job market looks strong, as the unemployment rate remained near a 50-year low in April 2025 at 4.2%, and American employers added 177,000 jobs, even amid the uncertainty of tariffs and trade wars, as per a report.But the 'true' rate of unemployment in the US in April was 24.3%, which rose 0.03% from the previous month, as per the Ludwig Institute for Shared Economic Prosperity (LISEP) data, reported Moneywise. LISEP's True Rate of Unemployment (TRU) includes the data of the unemployed people in the US and also the workers who are employed but still struggling, according to the report.LISEP Chair Gene Ludwig said, 'We are facing a job market where nearly one-in-four workers are functionally unemployed, and current trends show little sign of improvement,' quoted Moneywise.The institute's metric, called the True Rate of Unemployment (TRU), redefines what it means to be employed, and unlike the Bureau of Labour Statistics, which counts a person as employed even if they worked as little as one hour in a two-week period, TRU focuses on whether that work is actually sustainable, according to the report.Anyone falling short of that, like part-time workers looking for more hours, those earning poverty-level wages, or people who aren't counted by the BLS because they stopped looking for work are included in the TRU, as per Moneywise.Ludwig explained that, 'The harsh reality is that far too many Americans are still struggling to make ends meet, and absent an influx of dependable, good-paying jobs, the economic opportunity gap will widen,' as quoted in the report.The official unemployment rate leaves out people who aren't actively job hunting, even if they want work, and in April, that included 5.7 million people, as per Moneywise. TRU includes them along with low-wage workers and the underemployed, offering a more complete view of who's actually making a living, according to the report.LISEP said the rate reported by the BLS is 'not technically false,' but is 'deceiving,' considering the number of Americans in the workforce who are 'employed on poverty-like wages' or 'on a reduced workweek that they do not want,' reported Moneywise.The numbers are even more concerning when broken down by race and gender, as per Moneywise report:The institute also revealed that Black Americans have had a higher TRU than white Americans every single month since 1995, as per the report.LISEP says, this method, 'provide policymakers and the public with a more transparent view of the economic situation of all Americans, particularly low- and middle-income households, compared with misleading headline statistics,' quoted Moneywise.Ludwig said, 'Amid an already uncertain economic outlook, the rise in functional unemployment is a concerning development,' adding, 'This uncertainty comes at a price, and unfortunately, the low- and middle-income wage earners ultimately end up paying the bill," as quoted in the report.It's reported by the Ludwig Institute for Shared Economic Prosperity (LISEP), which aims to show the full picture of employment in the US.Not exactly, because it's just limited. LISEP says it's 'not technically false,' but it doesn't tell the full story.