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.


  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. [...]