---
title: Functional Unemployment Rose for a Fourth Month Even as the Official Jobless Rate Fell
description: A broader measure counting involuntary part-time and below-living-wage work hit 24.9 percent in July as US labor-force participation kept sliding.
author: Darie Nani (Editor-in-Chief)
updated: 2026-08-20T17:14:01.648Z
canonical: https://www.sovereignmagazine.com/article/functional-unemployment-rose-for-a-fourth-month-even-as-the-official-jobless-rate-fell
image: https://cdn.nanimediahouse.com/functional-unemployment-gap-182865.webp
categories: Markets
content_type: News
region: United States
publication: Sovereign Magazine
schema_type: Article
---

The share of Americans who are functionally unemployed rose for a fourth consecutive month in July, even as the official jobless rate fell, a split that the Ludwig Institute for Shared Economic Prosperity (LISEP) says points to a labor market losing strength beneath an improving headline number.

The institute's true rate of unemployment climbed to 24.9 percent in July, up 0.2 point from 24.7 percent in June. Since March the measure has gained 1.3 points, though it sits below its December peak of 25.2 percent. Over the same month the Bureau of Labor Statistics reported the official rate fell 0.1 point to 4.1 percent, and LISEP notes that the labor-force participation rate continued to decline.

The two numbers move apart because they count different things. Official figures include only people who are jobless and actively looking for work. The TRU also counts the functionally unemployed: those without a job, plus workers stuck in involuntary part-time roles, plus anyone earning below a living wage, which LISEP puts conservatively at $26,000 a year in 2025 dollars, before taxes. That wider lens captures people who hold a job on paper but cannot make a living from it, which the headline rate treats as employed.

## Four rising months, and a shrinking workforce

Functional unemployment has now increased every month since March, while participation has moved the other way.

"We shouldn't read too much into a single month, but four months begin to tell a story," said Gene Ludwig, the institute's chairman. "Functional unemployment is moving higher while workforce participation is moving lower. If this continues, it would suggest the labor market is losing strength despite what we may see in the headline unemployment numbers."

A companion gauge tracks the same drift. The institute's "TRU Out of the Population," which also counts working-age people who have left the labor force entirely, rose to 53.8 percent from 53.6 percent, and is up 0.8 point since the start of the year.

Ludwig said the withdrawal itself carries a warning. "In a strong labor market, good jobs and rising wages should bring more people into the workforce, not fewer," he said. "We need to pay attention when that starts moving in the other direction. It could be a sign that people aren't finding the opportunities they want or need, which matters for the broader economy."

## Women and White workers drove July's increase

The monthly move was uneven across groups. The TRU for Black workers held at 27.3 percent, and for Hispanic workers it fell 1.5 points to 26.7 percent, a second straight monthly drop. For White workers it rose 0.6 point to 23.8 percent.

The sharpest split was by gender. Functional unemployment for men fell 0.9 point to 19.5 percent, while for women it rose 1.6 points to 31 percent, the highest reading since March 2021. That widened the gap between the two from 9 to 11.5 percentage points.

Ludwig is a longtime figure in US financial policy. He served as US Comptroller of the Currency from 1993 to 1998, later founded the Promontory group of companies and the fintech fund Canapi, and created the TRU in October 2020, a year after founding the institute with his wife, Dr. Carol Ludwig. He designed it to count what the official rate leaves out.

The institute's monthly data can be found at [lisep.org/tru](https://www.lisep.org/tru).

## FAQ

**Q: What is the true rate of unemployment?**
It is a measure from the Ludwig Institute for Shared Economic Prosperity that counts the functionally unemployed: people who are jobless, in involuntary part-time work, or earning below a living wage, which LISEP sets at $26,000 a year in 2025 dollars before taxes. It reached 24.9 percent in July 2026.

**Q: What is the real US unemployment rate right now?**
By the official Bureau of Labor Statistics count it was 4.1 percent in July 2026, down 0.1 point. By LISEP's broader functional measure it was 24.9 percent, up for a fourth straight month.