A new report has revealed a concerning reality about the U.S. labor market. Nearly one in four American workers are considered “functionally unemployed”, meaning they are struggling with joblessness, underemployment, or low wages. The report sheds light on a deeper issue in the workforce that may not be visible in official government figures.
Millions Struggling Despite Low Official Unemployment
According to the latest research from the Ludwig Institute for Shared Economic Prosperity (LISEP), about 24.8% of the U.S. workforce falls under the category of functional unemployment as of November 2025. This figure is far higher than the official unemployment rate of 4.6% reported by the Bureau of Labor Statistics (BLS). Functional unemployment includes not only those who are unemployed, but also people seeking full-time work who cannot find it and individuals earning poverty-level wages of $26,000 per year or less.
The report uses a metric called the True Rate of Employment (TRU) to provide a more complete view of the labor market. While the TRU dropped slightly by 0.1% from September, it has risen 0.7% over the past year, indicating persistent challenges for workers.
LISEP Chair Gene Ludwig said the figures highlight how many households are feeling the effects of a labor market that has grown less forgiving. He noted that stagnant wages and rising costs for basic necessities continue to stretch household budgets.
Restructuring layoffs backfire as markets suspect deeper trouble, Goldman finds
Disparities Among Demographics
The report highlights that functional unemployment is not evenly distributed across the population. Black and Hispanic workers are disproportionately affected, with TRU rates of 28.1% and 27%, compared to 23.3% for White workers. The gap shows that racial and ethnic disparities remain a significant issue in the labor market.
Gender differences are also notable. Women are more affected than men, with a TRU of 30.1%, while men have a slightly lower rate of 20.2%. This indicates that women continue to face more challenges in accessing full-time employment or earning sufficient wages.
Some experts, including labor economist David Card, have expressed caution about combining poverty, underemployment, and unemployment into a single measure. While the BLS tracks multiple employment indicators, including wages and part-time work, Card said it is not always clear whether a single index provides the clearest picture of labor market health.
Remote jobs exploited in global scheme as Amazon halts 1,800 North Korea-linked applications
Job Growth Sluggish Amid Rising Layoffs
Even as headlines suggest the U.S. economy added jobs in November, the underlying reality is more complex. The BLS reported 64,000 new jobs in November 2025, while the official unemployment rate rose slightly to 4.6%, the highest since September 2021.
The report also points to growing layoffs across the country. Data from the outplacement firm Challenger, Gray & Christmas shows that U.S.-based employers announced over 71,000 job cuts in November, marking a 24% increase year-over-year. The total layoffs for 2025 have reached nearly 1.2 million, the highest since 2020.
Rising layoffs, coupled with stagnant wages, mean many households are facing pressure to make ends meet. Basic expenses like food, housing, and utilities continue to stretch family budgets. Federal Reserve Chair Jerome Powell has noted that the labor market has shifted from the “low hire, low fire” balance, signaling tougher conditions for workers.
The report stresses that the official unemployment rate may not fully capture the difficulties faced by American workers. By including people who are underemployed or earning very low wages, LISEP argues that functional unemployment provides a clearer picture of who is truly struggling in the labor market.
