A low unemployment rate is typically viewed as a sign of a healthy economy. In April 2025, the official U.S. unemployment rate held steady at 4.2%, remaining near a 50-year low. On top of that, American employers added 177,000 jobs during the month, despite ongoing concerns surrounding Trump’s tariffs and trade tensions.
Sounds encouraging—right? Not necessarily.
According to the Ludwig Institute for Shared Economic Prosperity (LISEP), the “true” unemployment rate in April was a staggering 24.3%, up slightly—0.03%—from March. This number, part of LISEP’s True Rate of Unemployment (TRU), includes not only those who are officially unemployed but also workers who are employed yet still struggling to get by.
“We are facing a job market where nearly one in four workers are functionally unemployed, and current trends show little sign of improvement,” said Gene Ludwig, LISEP chair, in a statement shared via PR Newswire.
“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.”
That may help explain why consumer confidence continues to drop, even as the headline employment rate appears stable.
What Is ‘Functional Unemployment’?
Why such a wide gulf—almost 20 percentage points—between LISEP’s rate and the official figure from the Bureau of Labor Statistics (BLS)?
The BLS collects vast data on employment and joblessness, but its official unemployment rate excludes certain categories. For example, 5.7 million people wanted a job but weren’t counted as unemployed because they hadn’t actively looked for work in the four weeks before the survey or were unavailable to start a job, according to BLS definitions.
LISEP uses BLS data but applies a different lens. Rather than tracking just joblessness, it focuses on “functional unemployment,” defined as the share of the labor force that:
- Doesn’t have a full-time job (35+ hours/week) but wants one,
- Has no job at all,
- Or earns less than $25,000 annually before taxes—a level it deems below a living wage.
In doing so, LISEP’s TRU metric captures not only those out of work, but also those in poverty-wage jobs, and underemployed part-time workers who want full-time roles. It aims to offer a more comprehensive view of labor market distress—highlighting economic pain points that traditional measures often overlook.