Employment researchers are warning that the share of Americans who are only loosely attached to the labor force is on the rise, and that the true rate of unemployment may be far higher than official figures suggest.

According to a new report from the Ludwig Institute for Shared Economic Prosperity (LISEP), 25.2 percent of the U.S. workforce could now be classified as “functionally unemployed”—meaning jobless, seeking but unable to secure full-time employment or earning “poverty-level wages.” This marks an increase from 24.8 percent in November and, as LISEP notes, represents the highest “True Rate of Employment”—or TRU—since June 2021.

“Looking beyond monthly fluctuations, the broader labor market trends warrant close attention,” LISEP Chair Gene Ludwig said. “The share of workers who are functionally unemployed has risen over the past year and returned to post-pandemic highs, pointing to ongoing challenges in access to full-time, living-wage employment.”

Why It Matters

Although some experts have questioned LISEP’s methodology and the utility of its TRU figure as an economic indicator, the think tank argues that its research into workforce participation and underemployment can highlight often-overlooked elements of economic and labor market conditions in the U.S.

“By accounting for underemployment and poverty-level wages, the TRU offers a more complete picture of our economic health,” Ludwig previously told Newsweek. “It shifts focus from simply asking ‘are people employed, however minimally?’ to ‘are people getting enough work to sustain a basic standard of living?'”

What To Know

According to the most recent employment report from the Department of Labor‘s Bureau of Labor Statistics (BLS), the economy added 50,000 jobs in December following a gain of 56,000 the prior month. The unemployment rate, meanwhile, ticked down to 4.4 percent from a revised reading of 4.5 percent for November, while the total number of unemployed Americans remained broadly stable at 7.5 million. 

While the headline unemployment rate has seen a notable jump from 4 percent last January, LISEP believes the official rates reported by the BLS are “deceiving” given the share of workers employed on extremely low wages or forced into reduced hours.

“If we continue to define success as solely having a job, even if that job is just for an hour or more every two weeks, without asking whether that job pays enough to support living above a poverty wage, we are effectively blinding ourselves to the very structural challenges that we would hope policymakers are trying to address,” LISEP’s chair previously told Newsweek.

By demographic, the group said the TRU rose 1.5 percent for both Black and Hispanic workers in December—now at 29.6 percent and 28.5 percent, respectively—while the rate for white workers dipped to 23.2 percent from 23.3 percent. Additionally, the share of men “functionally unemployed” increased 0.3 percentage points to 20.5 percent, while the rate for women rose to 30.3 percent from 30.1 percent.

What People Are Saying

LISEP Chair Gene Ludwig wrote in the recent report: “The data point to a labor market that has become increasingly static. Low hiring is making it harder for new entrants to find work, contributing to higher functional unemployment. At the same time, persistently elevated functional unemployment rates for Black and Hispanic workers denote a higher prevalence of low wages and part-time work. While monthly demographic data can be volatile, these trends warrant careful attention as they evolve.”

What Happens Next

Forecasters anticipate many of the conditions that characterized the 2025 labor market—sluggish hiring and elevated levels of job cut announcements—to persist in 2026, with surveys showing minimal confidence in employment conditions over the coming months.