Journal Article

The shadow labor supply and its implications for the unemployment rate

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.

Keywords: Labor supply; Unemployment; Shadow labor supply;

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Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Economic Review

Publication Date: 2013

Issue: Q III

Pages: 5-29