Unemployment numbers are a good indication of the state of a country’s economy and its people, but traditional calculations can be a little misleading. New statistics regarding “functional employment” within the US in 2025 paint a more clear and far more concerning picture. A recent report from the Ludwig Institute for Shared Economic Prosperity (LISEP) showed that the true rate of employment stood at 24.3% in April, as opposed to the 4.2% unemployment level stated by the U.S. Bureau of Labor Statistics.
Does this mean the Labor Bureau made an incorrect estimate? Not necessarily. The metrics used by the two organizations are slightly different but the concept of “functional unemployment” more accurately represents the current state of the workforce. The nonprofit’s data showed that 1 in 4 Americans are effectively “jobless,” although they may be hunting for jobs with no luck or have full-time jobs that still keep them below the poverty line. Understanding functional unemployment is essential to understanding the state of the workforce.
The calculation of functional unemployment is a more comprehensive estimation of the state of unemployment in the country. (Image: Freepik)
Exploring Functional Unemployment in 2025—What It Means for Workers
The U.S. Bureau of Labor Statistics’ estimation of the unemployment rate of 4.2% suggests that the unemployment levels in the region have largely remained unchanged over the last few years. This suggests that most Americans have some form of sustainable work to keep them busy and earning a living wage. Unfortunately, the data that is used to calculate these numbers don’t paint the full picture.
Due to the way the metrics are used in the calculation, there are various categories of data that are missed in the estimates, obfuscating the true unemployment rate in the US.
With the number of federal layoffs that were initiated in 2025, paired with the job cuts occurring across sectors, it is impossible that the unemployment levels have remained consistently unchanged. Yes, employers may be hiring some of them immediately, but most organizations have also slowed down their hiring cycles for the year, focusing their resources on other facets of the organization. This is why the calculation of the true unemployment rate in the US provides a more transparent look at how citizens are making a living.
What Is Functional Unemployment?
Function unemployment refers to the estimate of unemployment levels that takes into account workers who do not have a full-time job—over 35 hours of work a week—but are seeking one, workers who are actively unemployed, and workers who do not earn a living wage of at least $25,000 annually before taxes. These individuals may have some form of work to do, but they cannot make a living wage for one reason or another, and thus have to rely on benefits or work to sustain themselves on the bare minimum. While they are technically employed, they are functionally unemployed.
LISEP’s calculation of the True Rate of Unemployment is “a measure of the functionally unemployed, defined as the jobless plus those seeking, but unable to find, full-time employment, and those in poverty-wage jobs.” This calculation of the true unemployment rate in the US stands at 24%, and it has remained at this level or higher since February. The numbers also indicate that functionally unemployment is higher among Black and Hispanic workers.
“We are facing a job market where nearly one-in-four workers are functionally unemployed, and current trends show little sign of improvement,” LISEP Chair Gene Ludwig said in relation to the report. “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.”
Why Is the True Unemployment Rate in the US Relevant?
The unemployment rates in the country offer a useful estimate of the job market and how citizens are faring during the time period. These numbers help with planning future legislation and also provide clarity on the budgetary requirements for various programs. The study of functional unemployment provides further clarity on the data, aiding with greater transparency on the state of affairs.
If 1 in 4 Americans are effectively jobless in 2025, there are extensive changes necessary in order to bring some stability back into their lives. Being jobless despite employment puts workers in a very difficult position of being overworked while simultaneously ill-equipped to find better employment opportunities. Despite working poverty wages, many cannot leave their current roles to go job hunting considering the pay—low as it might be—is still essential for them to make it through their day-to-day needs.
Low- and middle-income households are worst affected in terms of employment and opportunity, and creating better conditions to help them emerge from the situation can uplift the community overall. With the federal minimum wage has stagnated for years, most states have made an active effort to bring the minimum wage up, however, the numbers are still not high enough for workers earning the minimum to make a living wage.
With the concept of functional joblessness explained it might be more clear that active change is necessary to support workers who want to break past the barriers they have been presented with in their pursuit of employment.
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