Category: Economy, Employment, Think Tank

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2 Responses to “The Shadow Labor Supply and Its Implications for the Unemployment Rate”

  1. SecondLook says:

    Offsetting to some, perhaps major extant, the unemployment numbers is the number of people earning an income through what economists call the “informal” market – financial transactions that don’t get reported. Ranging from criminal activities (in monetary value, mostly drugs and sex work), to non-reported cash payments for goods and services (think day laborers for example, and all those tips never recorded), to old fashioned bartering (yes, trading a lawn mower for a set of skis with your neighbor is an economic activity).

    Estimates range from 5 to 8% of the total US economy is on the informal side – but that never shows up in official GDP estimates.
    One could argue that if it were, and a good analysis of how many are employed that way, then the real numbers would be lower by at least a percentage point, across the various U estimates.

    It’s funny how both politicians and the public.never want to discuss that aspect of our society. We all know that there is a tremendous amount of cash flow that never shows up on the books, but we don’t want to think about how much and how it affects such things as unemployment.

    Odd…

  2. [...] White paper: The shadow labor supply & its implications for long term unemployment | Federal Res… Examines the long term unemployed & their impact on the economy. These “shadow” job seekers are discouraged workers who aren’t accounted-for by headline (U3) unemployment rates, but are included in U4-6 series & labor force participation. As they return to the job market, they’ll raise the unemployment rate +50bps by 2016. Overall, the structural/demographic changes to labor force participation should raise unemployment +1pp by 2016. [...]