New labor market data is prompting renewed questions about the strength of the U.S. economy, as some researchers warn that unemployment may be far worse than official government numbers indicate.
A recent report from the Ludwig Institute for Shared Economic Prosperity (LISEP) suggests that 25.2 percent of American workers are now “functionally unemployed.” This category includes people who are out of work, unable to secure full-time jobs, or earning wages so low they struggle to cover basic living expenses. The figure represents an increase from November and marks the highest level recorded since 2021.
According to LISEP, traditional unemployment statistics often fail to capture the full picture of economic stress facing working Americans. Federal data counts anyone working as little as one hour over a two-week period as employed, even if that work does not provide a livable income.
LISEP Chairman Gene Ludwig warned that focusing only on headline numbers can mask deeper labor market problems. He said the share of Americans unable to find stable, full-time employment has steadily increased over the past year, returning to levels seen in the aftermath of the pandemic.
Government figures from the Bureau of Labor Statistics paint a more optimistic picture. The agency reports that the economy added roughly 50,000 jobs in December, following modest gains the previous month. The official unemployment rate dipped slightly to 4.4 percent, while the total number of unemployed Americans remained around 7.5 million.
However, LISEP argues those figures are misleading. The group believes that underemployment, stagnant wages, and reduced work hours have left millions of Americans financially strained, even though they are technically counted as employed.
The report also highlights differences across demographic groups. Functional unemployment rose among Black and Hispanic workers in December and remained elevated for women overall. Men also experienced a slight increase, reflecting slower hiring and fewer opportunities for new job seekers.
Looking ahead, many economists expect labor market challenges to persist into 2026. Employer surveys point to cautious hiring plans, limited job openings, and ongoing concerns about layoffs. For many Americans—particularly retirees, near-retirees, and working families—the gap between official economic reports and real-world experience continues to raise serious concerns about the true state of the job market.