This paper establishes the theoretical limits of graph clustering under the Popularity-Adjusted Block Model (PABM), addressing limitations of existing models. In contrast to the Stochastic Block Model (SBM), which assumes uniform vertex degrees, and to the Degree-Corrected Block Model (DCBM), which applies uniform degree corrections across clusters, PABM introduces separate popularity parameters for intra-and inter-cluster connections. Our main contribution is the characterization of the optimal error rate for clustering under PABM, which provides novel insights on clustering hardness: we demonstrate that unlike SBM and DCBM, cluster recovery remains possible in PABM even when traditional edge-density signals vanish, provided intra-and inter-cluster popularity coefficients differ. This highlights a dimension of degree heterogeneity captured by PABM but overlooked by DCBM: local differences in connectivity patterns can enhance cluster separability independently of global edge densities. Finally, because PABM exhibits a richer structure, its expected adjacency matrix has rank between k and k^2 , where k is the number of clusters. As a result, spectral embeddings based on the top k eigenvectors may fail to capture important structural information. Our numerical experiments on both synthetic and real datasets confirm that spectral clustering algorithms incorporating k^2 eigenvectors outperform traditional spectral approaches.