Even though the job market expanded in February, a smaller percentage of those positions are paying a living wage — resulting in the highest "functional unemployment" rate in two-and-a-half years, according to the monthly True Rate of Unemployment (TRU) report by the Ludwig Institute for Shared Economic Prosperity (LISEP).

The TRU measures the "functionally unemployed," defined as the jobless plus those seeking, but unable to find, full-time employment paying above the poverty line (pegged at $25,000 a year in 2024 dollars). The February TRU jumped 1.6 percentage points, from 23.3% to 24.9% — the highest level since July 2021. By contrast, the official unemployment rate issued by the U.S. Bureau of Labor Statistics increased only marginally, from 3.7% to 3.9%.

This is one of the largest month-over-month TRU increases since 1995, the earliest year LISEP has data. LISEP researchers surmise that a combination of rising consumer prices, coupled with a concentration of job growth in low-wage occupations, contributed to the spike in functional unemployment.

"Despite glimmers of hope in the economy, the harsh reality is that far too many Americans and their families are still locked in a struggle to make ends meet," said LISEP Chairman Gene Ludwig. "The February TRU report serves as a stark reminder: having a job simply is not enough anymore. We need a shift toward dependable, stable, good-paying jobs that empower families to achieve and maintain a reasonable standard of living."

While functional unemployment is up for all major demographic groups, Black, Hispanic, and female workers saw the largest increases. The TRU increased 1.5 percentage points for both Black and Hispanic workers, now 27.7% and 29.3%, respectively. The TRU for White workers was up 1 percentage point, from 21.7% to 22.7%. Both Black and White workers are seeing their highest TRU since October 2022.

For Black and Hispanic workers, the higher TRU seems to be driven in part by a higher labor force participation rate, suggesting that many new workers were unable to secure living-wage jobs, according to LISEP.

Meanwhile, the living-wage gender gap widens further. The TRU for women in the workforce jumped 2 percentage points, reaching 30%. The TRU for men increased 1 percentage point, to 20.2% — creating a gender gap of nearly 10 percentage points. This marks the highest TRU for women since August 2021 and for men since September 2021.

"Headline economic statistics paint an incomplete picture — often bordering on fiction — for   middle- and working-class families," Ludwig said. "Policymakers must acknowledge this disparity, particularly that not everyone shares equally in recent economic gains. Their focus should shift toward creating opportunities for those who need them the most — and that begins with the availability of living-wage jobs."