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The shadow labor supply and its implications for the unemployment rate

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  • Troy Davig
  • Jose Mustre-del-Rio

Abstract

In the wake of the Great Recession there has been a sharp rise in the number of people who indicate they want a job, but are not actively seeking one. This group, on the periphery of the labor market, may be viewed as a \\"shadow labor supply.\\" Since they are not actively seeking work, they are not counted by the government as unemployed and not considered part of the labor force. But if many start seeking jobs as the economy recovers, the unemployment rate could rise or at least slow its descent. Davig and Mustre-del-Ro analyze possible flow rates from this group and other non-employed groups into employment or into official unemployment. They find the shadow labor supply will likely affect the unemployment rate only modestly, but potential variation in labor market participation among the entire non-employed population may have greater impact.

Suggested Citation

  • Troy Davig & Jose Mustre-del-Rio, 2013. "The shadow labor supply and its implications for the unemployment rate," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-29.
    • Handle: RePEc:fip:fedker:00008
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    References listed on IDEAS

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