‘Functional Unemployment’ Improves in January; Remains Up Year-Over-Year, Says Ludwig Institute

Living-wage job levels improve for all demographics, but gender gap widens

WASHINGTON, Feb. 20, 2026 /PRNewswire/ — The percentage of the American workforce considered “functionally unemployed” dropped in January, down from a four-year high in December—but still remains higher than a year ago, according to a report from the Ludwig Institute for Shared Economic Prosperity (LISEP).

LISEP’s December True Rate of Unemployment (TRU) report—a measure of the functionally unemployed, defined as the jobless, those seeking but unable to find full-time employment, and those earning poverty-level wages—decreased 1.4 percentage points, from 25.2% to 23.8%. All demographics saw improvements in their respective TRU. The Bureau of Labor Statistics (BLS) reported a 0.1 percentage point improvement in the official unemployment rate for the month, from 4.4% to 4.3%.

The January TRU, while an improvement over the December rate of 25.2%—the highest level since June 2021—remains 0.3 percentage points higher than January 2025. Over the past three months, the TRU has averaged 24.6% compared to 23.9% a year ago.

“Improvements in living-wage job availability are always welcome,” said LISEP Chairman Gene Ludwig. “However, we’re careful not to over-interpret short-term fluctuations. The key question is whether this represents the start of a sustained shift or a temporary bounce within a still-challenging environment.”

The TRU improved for all major demographics, most notably for Black workers, with a decrease of 2.8 percentage points, from 29.6% to 26.8%. Similarly, the rate for Hispanic workers dropped a full percentage point, from 28.5% to 27.5%, while the rate for White workers declined a half percentage point, to 22.7%. Over the past three months, the TRU for Black, Hispanic, and White workers has averaged 28.2%, 27.7%, and 23.1%, respectively.

By gender, the TRU for men decreased 1.2 percentage points, to 19.3%, while the rate for women dropped 0.5 percentage points, to 29.8%. Over the past three months, the TRU for women has averaged 30.1% compared to 20% for men—a 10.1 percentage point gender gap, compared to 8.7 percentage points a year ago.

“Short-term progress is certainly encouraging,” Ludwig said. “The real test is whether it becomes sustained improvement in economic stability for households. For many low- and middle-income Americans, economic security still feels fragile, which is why policy grounded in lived experience remains essential to turning positive movement into lasting gains.”

About TRU
LISEP issued the white paper “Measuring Better: Development of ‘True Rate of Unemployment’ Data as the Basis for Social and Economic Policy” upon announcing the new statistical measure in October 2020. The paper and methodology can be viewed here. LISEP issues TRU one to two weeks following the release of the BLS unemployment report, which occurs on the first Friday of each month. The most recent TRU and supporting data are available on the LISEP website at https://www.lisep.org/tru.

About LISEP
The Ludwig Institute for Shared Economic Prosperity (LISEP) was created in 2019 by Ludwig and his wife, Dr. Carol Ludwig. The mission of LISEP is to improve the economic well-being of middle- and lower-income Americans through research and education. LISEP’s original economic research includes new indicators for unemployment, earnings, and cost of living. These metrics aim to 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. On X: @LISEP_org.

About Gene Ludwig
In addition to his role as LISEP chair, Gene Ludwig is a managing partner of Canapi LLC, a financial technology venture fund. He is the founder and CEO of Ludwig Advisors, which counsels financial firms on critical matters. Ludwig is also the founder of the Promontory family of companies. He is the former vice chairman and senior control officer of Bankers Trust New York Corp. and served as the U.S. Comptroller of the Currency from 1993 to 1998. He is also author of the book The Vanishing American Dream, which investigates the economic challenges facing low- and middle-income Americans. His new book, The Mismeasurement of America, was published September 2025 and is now available online or wherever books are sold. On X: @geneludwig.

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SOURCE Ludwig Institute for Shared Economic Prosperity