America's Shadow Economy

November 07, 2023

Recently I was reading the employment report for September and was amazed and perplexed by the results. Over 336,000 jobs were added to the US economy in September alone, far higher than any projection. An estimated 96,000 jobs were added in the Leisure/Hospitality industry, Food Services/Bars added 61,000 and Government employment added 73,000 jobs. Other job gains were in Social Assistance and Healthcare, and wages continue to rise with hourly earnings having increased by over 4.2% in the last year. While job growth suggests a strong economy, the numbers left me scratching my head, as the unemployment rate is 3.8% meaning we’re close to full employment.

According to NBC News, the number of undocumented illegal immigrant crossings on our southwestern border topped 2.76 million in 2022. However official government numbers show the total number in the country has decreased in the last 2 years which seems impossible for me to believe. The US Census Bureau today uses the annual American Community Survey to estimate the official number, a method that has been used for over 30 years. In 2018 a report generated by three Yale researchers came up with a totally new outcome, after running 1 million simulations of their model data, they concluded the range was between 16 to 29 million, with 22 million as the mean. And this was in 2018!

You must be thinking, what does this have to do with the jobs report? The jobs report has no official way of knowing if the data includes undocumented people who were hired on any given month. That means there is at a minimum an unknown amount of people the size of the entire state of North Carolina (11 million) or as high as Texas (30 million) as a pool to get hired. Many of these undocumented do not want to get discovered and live in the shadows so to speak. Thus, my theory is a Shadow Economy in America exists. And this Shadow Economy of people has grown to a size that is significant enough to alter data, making the old methods of research and accounting out of date and out of touch.

Is this Shadow Economy bad for America? From a pure economic perspective, the answer is no, many are hired when others are not available or not interested. Their earnings make its way back into an economy that is 70% consumer spending. From a legal and moral perspective, my thought is it’s downright frightening and nobody knows what lies ahead.

The bottom line…with all government reports we must assume they are nothing more than estimates. Please don’t hesitate to send me Your2Cents and pass this along to others who may find it interesting. We wish you and your family a happy and safe Halloween…I will be the guy in the giraffe suit walking with my granddaughter…I can’t wait!


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