This article originally appeared in the September 2025 edition of MortgagePoint magazine, online now.
The United States is often told it is living through an era of low unemployment. Headlines repeat the familiar statistic. The Bureau of Labor Statistics (BLS), the government arm tasked with tracking trends in the employment sector, surveys U.S. households, businesses, and government agencies to produce a monthly report known as the “jobs report,” a leading indicator of the number of jobs the economy has gained or lost in a given month. Data collected and presented by the BLS is often difficult and complex to measure, yet of extreme importance to policymakers, the private sector, and for consumers to grasp what exactly is taking place in the employment sector.
The Commissioner of the BLS is tasked with ensuring that the Department’s statistical function adheres to the standards set forth in the Confidential Information Protection and Statistical Efficiency Act (Title 3 of the Evidence Act), including that the BLS will protect the confidentiality of respondents and the information they provide, and will coordinate with the Census Bureau and the Bureau of Economic Analysis to improve the sharing of economic data.
This past April, the BLS reported an unemployment rate of 4.2%—a figure heralded as a sign of stability and strength. This unemployment figure reassured politicians who wanted to tell a story of resilience, and it reassured investors who looked for reasons to believe the economy would continue to grow.
Four percent unemployment is close to the lowest level in half a century. At the same time, the Ludwig Institute for Shared Economic Prosperity (LISEP) released a report that told quite a different story. LISEP’s own measure, titled True Rate of Unemployment, suggested that 24.3% of Americans were functionally unemployed in April. By this definition, nearly one in four working-age Americans was either unable to secure full-time work or earning so little that they were unable to make ends meet.
A near 20% disparity between the BLS data and LISEP’s analysis tells an entirely different picture of the U.S. labor market.
Since this news broke, Donald Trump has terminated BLS Commissioner Erika McEntarfer, after the BLS released its July jobs report showing that employment had slowed in July, and was much less in May and June than previously estimated. President Trump accused McEntarfer, without evidence, of manipulating the job numbers, and noted she was an appointee of former U.S. President Joe Biden.
“The President seeks to blame someone for unwelcome economic news. The Commissioner does not determine what the numbers are but simply reports on what the data show,” said the Friends of the Bureau of Labor Statistics, a coalition of trade groups completely independent of the BLS and BLS leadership. “The process of obtaining the numbers is decentralized by design to avoid opportunities for interference. The BLS uses the same proven, transparent, reliable process to produce estimates every month. Every month, BLS revises the prior two months’ employment estimates to reflect slower-arriving, more-accurate information.”
After McEntarfer’s dismissal, the BLS has since named William Wiatrowski Statistical Official, Acting Commissioner of Labor Statistics.
LISEP’s July True Rate of Unemployment report increased 0.6 percentage points month-over-month, from 24.1% in June to 24.7% in July. In contrast the official rate of employment reported by the BLS increased just 0.1 percentage point to 4.2% in July 2025. The functional unemployment rate, according to LISEP, has now remained at 24% or higher for six consecutive months.
The gap between the two measures raises uncomfortable questions … is the country truly at near full employment, or are millions of households living in survival mode and unable to reach even the first rung of what was once called the “American Dream?”
Speaking of the American Dream: “You want a balance in jobs,” said Edward J. Pinto, Senior Fellow and Co-Director of the AEI Housing Center at the American Enterprise Institute (AEI). “To get a balance in jobs, you have to have economic growth that’s happening in construction, in factory, in sales, in technology … all of those things, not just in the low wage healthcare portion of the sector and the food, hospitality, etc., lodging, and in government employment.”
What the Official Rate Shows
The unemployment rate most Americans hear about is the figure produced each month by the BLS. It is built on a simple set of rules. If you do not have a job, if you are available to work, and if you have looked for work within the last four weeks, then you are counted as unemployed. If you do not meet those criteria, then you are not included in that total.
The BLS definition also classifies anyone who has worked at all as employed. If you picked up one hour of paid work last week, you are employed. If you worked part-time while searching for full-time, you are employed. If you are patching together small bits of work, but do not have stability, you are still employed. If you gave up searching because you felt there were no jobs available, you do not appear in the official unemployment rate at all.
By this measure, the unemployment rate was steady at 4.2% in April, unchanged from March. In the same month, the official story was that employers were still hiring, even as tariffs and weak consumer confidence weighed on parts of the economy. For generations, that number has been the gold standard with policymakers, the financial markets, and the public interpreting it as a briefing of whether or not the economy is expanding or faltering.
What the True Rate Suggests
Gene Ludwig, Chair of the Ludwig Institute, argues that the official unemployment data leaves out too much. He notes that the current system counts people as employed even when their circumstances are dire. In his words, you can be homeless, living in a tent community, and if you worked a single hour in the last two weeks, you will be classified as employed. That is the flaw in classifying those as “unemployed” that he wants to correct.
The True Rate of Unemployment, or TRU, counts workers who are looking for work, but cannot find full time employment. It also counts those who are working but do not earn above a poverty wage. By doing so, it incorporates a much wider view of the American workforce. It includes people who are left behind by the official statistics.
The figure in April was 24.3%, up slightly from 24% the month prior. The rise occurred while the BLS rate remained unchanged. To Ludwig and his colleagues, that gap shows how misleading the official numbers can be. TRU has been published since 2020. It is built to track functionally unemployed workers, people who do not have steady jobs that provide a living wage.
Ludwig has described it as a means to measure the millions of Americans who are in survival mode, rather than on a path toward security.
Defining Functional Unemployment
When Ludwig and his colleagues describe functional unemployment, they are talking about more than the absence of work. They are talking about people who are unable to secure enough hours or earn enough money to make ends meet. That includes workers who are stuck in part-time jobs while seeking full-time employment. It also includes those who may have a job but whose wages are so low that they cannot afford housing, food, or basic savings.
Ludwig explained it clearly. If you are a part-time worker and cannot get a full-time job, you are functionally unemployed. If you do not earn above a poverty wage, you are functionally unemployed. In his words, that means you do not have anything that gets you to the first rung of the American Dream. You are in survival mode.
The Institute argues that the official unemployment rate presents an incomplete and misleading picture. It treats part-time jobs and low-wage jobs as if they are equal to full-time work that provides security. It fails to account for the reality of those who are working hard, but unable to advance forward.
The Unequal Burden
The TRU numbers also reveal disparities that are less visible in official statistics. Hispanic workers and Black workers fare worse than white workers when measured by functional unemployment. More than 28% of Hispanic workers are counted as functionally unemployed. Nearly 27% of Black workers fall into the same category. For white workers, the figure is 23%.
There are also clear differences by gender. The functional unemployment rate for women is 28.6%. For men, it is 20%. These gaps highlight how economic vulnerability is distributed unevenly across society. They show that entire communities bear heavier burdens than the headline unemployment number would suggest.
Kyle K. Moore, Economist with the Program on Race, Ethnicity, and the Economy at the Economic Policy Institute (EPI), noted that “one of the things that we do at EPI is put out this series every quarter … a state unemployment report by race and ethnicity that uses data from the local area on employment statistics and the American Community Survey (ACS) to create state-based measures of unemployment by group.”
Moore further explained, “That’s always going to be a useful thing to do, simply because there’s going to be regional variation in labor market conditions across the country.”
In light of this, Moore noted that it could be useful for LISEP “to attempt to try to create regional measures of their statistic.”
Survival Mode in Practice
The Ludwig Institute has published additional research that highlights what survival mode looks like. Millions of households across the country are struggling to maintain even a minimal quality of life. The group found that the lowest earning Americans made an average of $38,000 in 2023. To cover the costs of living tracked by LISEP’s index, those same households would need $67,000. The items in that index include essentials like housing, food, transportation, professional clothing, and basic leisure activities. Falling short of that mark means living with constant financial stress, not being able to save, and/or being one medical bill away from crisis. That is why the Ludwig Institute insists that part-time work or poorly paid work should not be equated with genuine employment.
As Jung Hyun Choi, a Principal Research Associate at the Urban Institute’s Housing Finance Policy Center, explained, “Most of the housing research looks at the household level income rather than the individual.”
This means that if an individual is in that true rate of unemployment bucket, but moves back with their parents, for example, they do not show up the same way.
According to Choi, “That’s another layer of complexity that is really difficult to compare this index with the housing market situation because the unit analysis is not at the individual level and most of the research that is in the housing market space.”
The Policy Risks
The wide gap between the official measure and the True Rate of Unemployment is not just an academic difference. It has real consequences. Ludwig argues that presenting a low unemployment rate makes political leaders complacent. If the figure is 4.2%, it is easy to claim success and move on. In this picture, one could declare that the economy is healthy, and that workers are thriving.
If the reality is closer to 24%, then millions of people are being overlooked. Policy that rests on the official number may ignore the needs of households that cannot cover basic expenses. It may assume the labor market is working when it is not, which could then allow inequalities to deepen. Ludwig warns
that such complacency can lead to poor decisions, and ultimately, hurt middle- and low-income Americans.
Moore pointed out: “If we think about the headline unemployment rate and TRU… the TRU is a more stable measure of the structural health of the economy.”
According to Moore, that 24% figure is the share of folks who might have trouble making consistent payments to maintain a mortgage or rent.
The Mirror of Statistics
The debate over TRU and the official unemployment rate reflects a deeper issue. Numbers are not neutral. They are mirrors that show particular reflections of reality. The BLS measure shows a workforce that appears strong and steady. LISEP’s measure shows a workforce with deep cracks beneath the surface. Both are built on rules, and both are internally consistent, but they reflect different choices about what counts as work and what counts as security.
“There’s a lot of abdicating of responsibility on the part of the government, and I think that’s the sort of mindset that leads us into risky situations that lead to bad behavior in financial markets,” Moore warned. “And that’s happened in the past a bunch of times, and we learned the lesson, and then we put regulations in place, and we decide that government should have oversight over certain things. And then time passes, and things are fine, and then people get risky again for whatever reason, and then they take risks and bad things happen. So, we end up in this cycle.”
The official rate provides continuity across decades, but it risks missing the distress of people in survival mode. The TRU shines a light on that distress, but it breaks with tradition and produces a figure that shocks by its scale. The tension between the two measures is not likely to disappear any time soon.
A Warning Sign
Whether one accepts the TRU or not, it is difficult to ignore the questions it raises. If nearly 25% of workers are functionally unemployed, that suggests weaknesses in the foundation of the economy, and that growth is not as inclusive as the headline numbers imply. It also suggests that millions of families are shut out of opportunities for stability and advancement.
According to Ludwig, people who are classified as employed but living in tents, unable to save or even put food on the table, are not being counted properly. They are not participating in the American Dream, but instead, are simply surviving. If those realities are ignored, the economy may be more fragile than the official statistics reveal.
Choi emphasized: “Our hypothesis, looking at wealth inequality between homeowners and renters, is that the gap has increased significantly in the past 10 years.” Specifically, Choi pointed to how homeowners locked into low rates built wealth, while renters often had nothing left to save. Thus, the housing market is exacerbating inequality, which Choi claimed “is a huge problem moving forward.”
Choi pointed out that in homeownership, rising insurance costs and property taxes vary by region, and in the rental market, rising home prices, interest rates, and rents are making ownership more out of reach, something that she sees as “a red flag” since “homeownership is still one of the critical tools to build wealth in this country.”
She noted another challenge, sharing fears backed by research that a lot of people are “traumatized by what happened during the Great Recession.”
Since then, banking has been overly regulated, making it difficult to expand credit. “It’s more overly tight,” she clarified.
Moore, meanwhile, cautioned that TRU is “a much less sensitive recession indicator” than the official rate, since it reflects ongoing structural precarity rather than sudden shocks. He also flagged another looming issue: the student debt repayment situation.
“I think people are realizing how big of a deal it is, month to month, as more people hit that threshold where the repayments have to start or they start impacting folks’ credit. That is the sort of pullback in demand in the economy that starts that spiral that leads to a recession.”
A Blurred Bottom Line
As things currently stand, the BLS reports an unemployment rate of just over 4%. The Ludwig Institute reports a True Rate of Unemployment closer to 25%. Between those two numbers lies a gaping gulf of interpretation. One tells a story of stability, while the other tells a story of survival mode.
The truth of the American labor market may depend on which mirror you choose to gaze into. One reflection flatters, while the other reveals cracks. Both are real in their own way. The challenge for policymakers, economists, and citizens is to decide which reflection will guide action. If the low official rate continues to dominate, complacency may persist. If the higher TRU gains recognition, the country may be forced to reckon with the hidden struggles of millions of its workers.
The choice is not merely statistical, it is about whose experiences count, whose struggles are seen, and whether the numbers that shape public debate reflect the reality of people living on the edge of survival.
