concurring in part and dissenting in part:

Charles Frost appeals the district court’s judgment affirming the decision of the Commissioner of Social Security. The decision denies an award of Supplemental Security Income (“SSI”) disability benefits to Frost after October 31, 1997 because Frost was no longer disabled after that date. We have jurisdiction over this timely appeal pursuant to 28 U.S.C. § 1291 .

I would affirm the Commissioner’s decision that Frost did not meet the requirements under Listing 12.06 after October 1997. I would also reverse and remand for further proceedings which would ascertain whether Frost met the requirements under Listing 12.03. I write separately because the correct standard of law to be applied on remand is the standard that was in effect at the time of Frost’s original hearing.

*365 I

In October 1996, Frost filed an application for SSI disability benefits asserting that he had been unable to work since May 1996. This application was denied both initially and upon reconsideration. Frost then requested a hearing before an Administrative Law Judge (“ALJ”).

A hearing before an ALJ was held in December 1997. Frost, his sister, and a vocational expert testified at the hearing. 1 In addition, the ALJ examined medical and mental health records from various mental health practitioners who evaluated Frost.

Based on the evidence presented, the ALJ concluded that Frost was disabled from May 1996 to October 1997. The ALJ found that Frost suffered from a compulsive disorder. The ALJ also indicated that Frost probably suffered from paranoid schizophrenia. Because medication had dramatically improved Frost’s medical condition after October 1997, the ALJ found that even though some of Frost’s symptoms remained, he no longer met the statutory definition of “disabled” under the Social Security regulations. The ALJ then concluded that Frost was ineligible for SSI benefits after October 1997. In making her decision, the ALJ also found that Frost had the ability to perform certain types of work, such as that of a kitchen helper or janitor.

Frost appealed the ALJ’s decision to the Appeals Council, which denied his request for review. As a result, the ALJ’s decision became the Commissioner’s final decision. See 20 C.F.R. § 404.981 . Frost sought judicial review of the final decision. The report and recommendation of Magistrate Judge John L. Weinberg urged affirmance of the Commissioner’s final decision. The district court adopted the Magistrate Judge’s report and recommendation by an Order and Judgment entered April 2001. Frost petitions for review of the Commissioner’s final decision.

II

Title XVI of the Social Security Act provides SSI disability benefits for persons who are “disabled.” 42 U.S.C. §§ 1381 -83f. In order to qualify for SSI disability benefits, a claimant must satisfy both the medical and the vocational components to the statutory definition of “disabled.” See 42 U.S.C. § 1382c.

To satisfy the medical component, a claimant must prove an inability “to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment ... which has lasted or can be expected to last for a continuous period of not less than twelve months.” 42 U.S.C. § 1382c(a)(3)(A).

To satisfy the vocational component, a claimant must prove that his or her impairments “are of such severity that he is not only unable to do his previous work but cannot, considering his age, education and work experience, engage in any other kind of substantial gainful work which exists in the national economy.” 42 U.S.C. § 1382c(a)(3)(B).

The SSI regulations apply a sequential five-step evaluation process to determine whether a claimant is statutorily disabled. See 20 C.F.R. § 416.1520 .

At step one, the claimant is required to prove that he is not performing substantial gainful employment. See 20 C.F.R. § 404.1520 (b). If the claimant fails to meet his burden of proof at step one, the *366 claimant is not statutorily disabled and cannot qualify for SSI disability benefits. If the claimant meets his burden of proof at step one, then the claimant can proceed to step two. Id.

At step two, the claimant must prove that he has at least one “severe” impairment. See 20 C.F.R. § 404.1520 (c). A “severe” impairment is one that limits the claimant’s ability to do work. See 20 C.F.R. § 416.920 (c). Like step one, if the claimant cannot meet his burden of proof, the analysis stops; but if the claimant meets his burden, then the claimant can proceed to the next step. See 20 C.F.R. § 404.1520 (c).

At step three, the claimant must prove that his impairment meets or equals an impairment on the Listing of Impairments (“Listing”) set forth in 20 C.F.R. pt. 404, subpt. P, app. 1. If the ALJ finds that the claimant’s impairment meets or equals an impairment on the Listing, then the ALJ can award SSI disability benefits. See 20 C.F.R. § 404.1520 (d).

If, at step three, the claimant cannot prove that his impairment meets the Listing, then at step four the claimant may alternatively prove that he cannot perform his past relevant work. If the claimant can perform past relevant work, the claimant will not qualify as statutorily disabled. See 20 C.F.R. § 404.1250 (e).

If the claimant proves he cannot perform his past relevant work, the ALJ will determine the claimant’s residual functional capacity. See 20 C.F.R. § 404.1250 (e). A residual functional capacity is a measure of the physical ability the claimant possesses despite his limitations. See 20 C.F.R. § 416.945 .

Taking into consideration a claimant’s residual functional capacity, the ALJ at step five then considers whether the claimant can do other work. See 20 C.F.R. § 404.1250 (f). The ALJ considers whether there are a significant number of jobs in the national economy that the claimant can perform. In considering whether there are a significant number of jobs that the claimant can do, the ALJ reviews vocational expert testimony or references the Medical-Vocational Guidelines at 20 C.F.R. pt. 404, subpt. P, app. 2. If the ALJ finds that there are a significant number of jobs in the national economy that the claimant can do, the ALJ concludes the claimant is not statutorily disabled and is not entitled to SSI disability benefits; if the ALJ finds that there are not a significant number of jobs in the national economy that the claimant can do, the ALJ concludes the claimant is disabled and entitled to SSI disability benefits. See 20 C.F.R. § 404.1250 (f).

Frost disputes the ALJ’s findings and conclusions at step three and step five only. Frost claims that the ALJ’s decision that Frost did not meet the Listings and that Frost could perform other work was not based on substantial evidence and contained legal error.

Ill

We review de novo the district court’s judgment affirming a denial of social security benefits. Moore v. Commissioner of the Soc. Sec. Admin., 278 F.3d 920, 924 (9th Cir.2002). We may set aside a denial of disability benefits when an ALJ’s findings are not supported by substantial evidence. See 42 U.S.C. § 405 (g); Tackett v. Apfel, 180 F.3d 1094, 1097 (9th Cir.1999).

Substantial evidence means more than a scintilla, but less than a preponderance. Richardson v. Perales, 402 U.S. 389, 402 , 91 S.Ct. 1420 , 28 L.Ed.2d 842 (1971); Sorenson v. Weinberger, 514 F.2d 1112 , 1119 n. 10 (9th Cir.1975). To find substantial evidence, “[t]he court must consider both evidence that supports and evidence that *367 detracts from the ALJ’s conclusion; it may not affirm simply by isolating a specific quantum of supporting evidence.” Jones v. Heckler, 760 F.2d 993, 995 (9th Cir.1985); accord Universal Camera Corp. v. N.L.R.B., 340 U.S. 474, 487-488 , 71 S.Ct. 456 , 95 L.Ed. 456 (1951); Mayes v. Massanari, 276 F.3d 453, 459 (9th Cir.2001). If the evidence can reasonably support either affirming or reversing the Commissioner’s decision, we will not substitute our judgment for that of the Commissioner. Mayes, 276 F.3d at 459 .

We may also set aside a denial of disability benefits when an ALJ’s findings of disability are based on legal error. Tackett, 180 F.3d at 1097 . We review the ALJ’s determination of law de novo, but we give deference to the ALJ’s reasonable construction of applicable statutes. See Edlund v. Massanari, 253 F.3d 1152, 1156 (9th Cir.2001). Even though findings might be supported by substantial evidence, the correct legal standard must be applied in making a determination of disability. See Flake v. Gardner, 399 F.2d 532, 540 (9th Cir.1968).

IV

There was sufficient evidence supporting the ALJ’s decision that Frost no longer met the requirements of Listing 12.06 after October 1997. There is also sufficient evidence to conclude that there were a significant number of jobs in the national economy that Frost could perform.

A

The ALJ found that Frost was disabled from May 1996 to October 1997. Medical improvements directly related to Frost’s ability to work occurred after October 1997 so that Frost no longer met the definition of disabled under the Social Security Act. Based on her findings, the ALJ concluded that Frost met the requirements for Listing 12.06 from May 1996 to October 1997, but that he no longer met Listing 12.06 after October 1997. Listing 12.06 covers Anxiety Related Disorders and says:

20 C.F.R. pt. 404, subpt. P, app. 1, § 12.06(1997).

Prior to October 1997, Frost met Part A because Frost experienced recurrent and intrusive recollections of a traumatic experience. Medical records disclosed that Frost had “intense obsessions and compulsions [which] occupied] almost all of his waking hours” and that these obsessions centered around Frost’s unreasonable worries about Frost’s nieces and Frost’s suspi-ciousness of neighbors.

Frost met Part B before October 1997 because Frost had frequent difficulties in concentrating resulting in failure to complete tasks and had repeated episodes of deterioration in work or work-like settings. Frost was diagnosed by a psychiatrist with paranoid-schizophrenia and obsessive-compulsive disorder marked by an impaired ability to relate appropriately to co-workers, supervisors and the general public and an inability to respond appropriately to the pressures and expectations of a normal work setting.

Frost’s impairments before October 1997 therefore satisfied the requirements of both Part A and Part B and his condition was within the scope of Listing 12.06. After October 1997, however, Frost failed to meet any of the requirements of Part B.

Frost’s symptoms began to improve after October 1997 because of his medication regimen and treatment plan. Frost’s doctors reported that Frost’s obsessive-compulsive symptoms were improving, the frequency of Frost’s hallucinations were decreasing, Frost’s personal appearance improved and Frost’s conversations became more appropriate and organized. Frost’s sister testified that she observed an improvement in Frost’s functioning.

Frost. claims that the ALJ failed to properly consider testimony and evidence indicating that Frost’s impairments continued to interfere with Frost’s ability to do work. Frost points to an undated letter from Dr. Price, Frost’s treating psychiatrist at the time of Frost’s hearing, stating “it would be fair to give [Frost] a chance to succeed in the workplace but I would not be surprised if his condition interfered with his ability to be a fully productive employee.”

Frost also observes that more recent medical records from his therapists were submitted to the Appeals Council. These records state that “it would help [Frost’s] self-esteem if he obtained a part-time job[,] however, judging from his history, it is questionable whether he could maintain it.”

Finally, Frost argues that his testimony about the side effects of his medication and his sister’s testimony about Frost’s continued obsessive worries and poor memory, despite his improvement, are further evidence that Frost cannot work.

*369 There is no indication that the ALJ rejected the evidence or testimony presented at Frost’s hearing; rather, the ALJ found that the testimony and evidence was consistent with the fact that even though some of Frost’s symptoms of impairment remained, there was medical improvement. Because of the medical improvement, the ALJ found that Frost no longer met the requirements of Listing 12.06 in that his difficulties in concentrating had improved and he no longer had repeated episodes of deterioration 6r decomposition. That the evidence and testimony indicate that Frost might still have some difficulties working is not sufficient to show that Frost still meets the medical requirements required by the Listing.

An ALJ is responsible for determining credibility, resolving conflicts in medical testimony, and resolving ambiguities. See Edlund v. Massanari, 253 F.3d at 1156 . Here, the ALJ determined that the testimony presented was credible in that it was consistent with the medical evidence; that there was no conflict in the medical evidence; and that there were no ambiguities in the evidence and testimony as to the whether Frost’s existing impairments still met Listing 12.06. In total, the evidence was sufficient to support the ALJ’s finding that Frost no longer met Listing 12.06 and the ALJ’s conclusion that Frost was no longer eligible for SSI disability benefits.

B

The SSI regulations require that when a claimant experiences medical improvement so that the claimant no longer meets the Listing, the ALJ must determine the claimant’s residual functional capacity based on the claimant’s medical improvement and whether the claimant can now do work. See 20 C.F.R. § 404.1593 (f).

In evaluating Frost’s residual functional capacity, the ALJ considered Frost’s age, education and vocational background in accordance with the regulations of the Medical-Vocational Guidelines. See 20 C.F.R. pt. 404, subpt. P, app. 2. The ALJ then considered the medical records and testimony which indicated that while Frost had some difficulties with concentration and interacting with the general public, his condition had improved to the point where he could understand, recall and follow simple instructions, and he could perform simple, repetitive tasks.

Based upon this residual functional capacity, the vocational expert testified that Frost could find work as a kitchen helper (which entailed medium, unskilled work) or as a commercial janitor (which entailed medium to heavy unskilled work). The vocational expert also testified that there are, respectively, 50,000 and 1,000,000 such jobs in the national economy.

This evidence is sufficient to support the ALJ’s conclusion that, given that Frost no longer met Listing 12.06, Frost was not disabled because he could perform work in the national economy.

V

A

Even though there was sufficient evidence supporting the ALJ’s determination that Frost was no longer disabled under Listing 12.06 after October 1997, the ALJ failed to adequately evaluate whether Frost’s impairments might meet the requirements of Listing 12.03 after October 1997. This case should be remanded so that Listing 12.03 can be considered.

Listing 12.03 covers Schizophrenic, Paranoid and Other Psychotic Disorders and, at the time of Frost’s hearing, provided:

20 C.F.R. pt. 404, subpt. P, app. 1, § 12.03 (1997).

The ALJ did not evaluate Frost under Listing 12.03, which covers Paranoid and Schizophrenic Disorders, even though the ALJ found that Frost probably had paranoid-schizophrenia. Section 12.03(C) specifically addresses medical improvement and should have been analyzed to determine whether Frost would have met the requirements of Listing 12.03 and therefore maintained his status as disabled and maintained his eligibility for SSI disability benefits.

The appellee argues that Frost should not be able to raise the issue of Listing 12.03 on appeal because it was not raised before the district court. While it is well-settled that a claimant generally cannot assert for the first time on appeal matters not raised at the district court level, see In re Professional Inv. Properties of America, 955 F.2d 623 , 625 (9th Cir.1992), that rule is not a bar in this appeal because the matter was raised in both the district court proceedings.

*371 B

Listing 12.03 was revised in 2000. See 65 Fed.Reg. 50,779-80 (August 21, 2000). The final rule revising Listing 12.03 specifically provides that the revisions to the Listing are effective September 20, 2000. See 65 F.R. 50,746 . The ALJ issued the decision in Frost’s case well before that day, in May 1998. Application of the revised standard to Frost’s case would be impermissibly retroactive.

“Regulations cannot be applied retroactively unless Congress has so authorized the administrative agency and the language of the regulations requires this result.” Sca mihorn v. Gen. Truck Drivers, 282 F.3d 1078, 1083 (9th Cir.2002) (citing Bowen v. Georgetown, Univ. Hosp., 488 U.S. 204, 208 , 109 S.Ct. 468 , 102 L.Ed.2d 493 (1988)).

Because the Social Security Act’s grant of authority to the Secretary of Health and Human Services to promulgate regulations, 42 U.S.C. § 1383b, “does not affirmatively grant [the Secretary] authority to make those regulations retroactive, and because the final regulations themselves do not provide any indication that they are to be applied retroactively, they do not govern this case.” 2 Id. (internal citations omitted). See also National Min. Ass’n v. Dept. of Labor, 292 F.3d 849, 860 (D.C.Cir.2002) (holding that a rule is impermissibly retroactive if “applied to claims that were pending on the regulations’ effective date”).

Because application of the revised Listing requirements would be impermissibly retroactive, the correct legal standard on remand is the one in effect at the time of Frost’s original hearing.

. A medical expert was also scheduled to testify, but did not testify due to scheduling reasons.

. This is unlike cases in which a change is made to the law and provisions amending the law specifically indicate that the changes apply to pending cases. For example, in Dean v. Gardner , the court held that amendments to the Social Security Act were applicable to all cases that were still pending as of the adoption date of the amendments. 393 F.2d 327, 329 (9th Cir.1968). The court based its decision on the fact that the amending act explicitly instructed that the changes would apply to all cases that were not final as of the adoption date, including cases on appeal to the federal circuit courts. Id.; see also Whitt v. Gardner, 389 F.2d 906 (6th Cir.1968); Flake v. Gardner, 399 F.2d 532 (9th Cir.1968).