Unemployment is almost back to normal, but the economy isn’t.
That isn’t because the unemployment rate is a conspiracy to make things look better than they really are. It’s because even though the unemployment rate tells us the most about the labor market, it doesn’t tell us the full story. All it does is show us how many people who are actively looking for work can’t find it. But that leaves out the “shadow unemployed” who want full-time jobs but have either given up looking for them or can only find part-time ones. That usually doesn’t make that big a difference, but it does now, because, even six years after the crisis has ended, there still isn’t much that’s usual about this economy.
Now if you add it all up, this shadow unemployment means our jobs hole is more than three times as big as it looks. That, at least, is what economists Danny Blanchflower and Andrew Levin found when they looked at how low the unemployment rate is versus how low we think it could go, how high the participation rate is versus how high we think it could go, and how many people can only find part-time jobs. That first part tells us how much further unemployment itself could fall, the second how many discouraged workers could come back, and the last how many people would work more if they could. In other words, it shows us the gap between how many full-time jobs we have and how many full-time jobs we need. The result, as you can see above, is that instead of being a million full-time jobs short, like the unemployment rate says we are, we’re about 3.5 million short.