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Federal Reserve Bank of Kansas City
Economic Review
The shadow labor supply and its implications for the unemployment rate
Troy A. 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-Río 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.


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Troy A. Davig & Jose Mustre-del-Rio, "The shadow labor supply and its implications for the unemployment rate" , Federal Reserve Bank of Kansas City, Economic Review, issue Q III, pages 5-29, 2013.
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Keywords: Shadow labor supply; Labor supply; Unemployment
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