Despite a slight improvement in overall functional unemployment in August, the U.S. labor market continues to show signs of weakness, according to the latest report from the Ludwig Institute for Shared Economic Prosperity (LISEP). Most notably, the functional unemployment rate remains over 24% for the seventh consecutive month, with the rate for prime-age workers jumping more than half a percentage point in August.

LISEP's August True Rate of Unemployment (TRU) report—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—fell 0.3 percentage points, from 25% to 24.7%, in contrast with the Bureau of Labor Statistics (BLS) official rate, which increased 0.1 percentage points to 4.3%. Over the past three months, the TRU has averaged 24.7%, compared to 24.2% during the first quarter of 2025.

The TRU for prime-age workers (25-54) increased 0.6 percentage point, to 18.5%. While certain key demographic groups saw improved rates in August, longer-term trends reveal weakening employment opportunities paying above poverty-level wages.

"While any short-term improvement in functional unemployment is welcome and might encourage optimism, longer-term trends point to a weakening labor market and growing challenges for low- and middle-income Americans," said LISEP Chair Gene Ludwig. "Our analysis of the TRU data over a three-month horizon shows rates consistently trending higher than in recent months, and for certain demographic groups, higher than in years."

Among demographic groups, the August TRU for Hispanic workers fell 1.5 percentage points, to 27.9%, while the TRU for Black workers decreased by 1.3 percentage points, to 27.8%. Despite this monthly decline, the three-month average TRU for Black workers from June to August of this year, at 28.4%, is the highest since 2021 and higher than the 26.8% average from the first three months of 2025. This trend is also reflected in BLS data, which reported a 7.5% unemployment rate for Black workers in August, compared to a 6% rate in May.

The TRU for White workers increased 0.5 percentage points in August, from 22.8% to 23.3%. The TRU for men improved by 1.4 percentage points, falling to 19.5%, while the rate for women increased 0.7 percentage points to 30.4%. Consequently, the three-month TRU gender gap widened to 9.9 percentage points in August.

"This isn't just about month-to-month changes; the elevated functional unemployment among low- and middle-income individuals reflects a long-term, systemic challenge," Ludwig said. "For decades, robust economic opportunities have often bypassed these workers, and our current TRU data continues to highlight this persistent struggle."

Data Revision Notice:
LISEP revised all seasonally-adjusted TRU data from 2023 and after to reflect the release of the March 2025 Annual Social and Economic Supplement (ASEC) microdata. LISEP uses ASEC data to calculate the TRU among self-employed workers. Incorporating the new ASEC data results in changes to the monthly TRU from July 2023 on (before seasonal adjustment). For 2025, the revisions resulted in a 0.2 percentage point increase in the TRU (not seasonally adjusted) and a 0.2-0.3 percentage point increase in the TRU for all workers in the labor force (seasonally adjusted, rounded to the nearest tenth). View the updated data here.