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Published: Tuesday, 7/19/2005

Jobless rate understated, Fed economist finds

WASHINGTON - The current U.S. unemployment rate probably understates the true level of joblessness by 1 to 3 percentage points, the senior economist at the Boston Federal Reserve said in a paper published by the Boston Fed.

Millions of potential workers who dropped out of the labor force during the recession four years ago have not returned as expected and thus are not counted in the official statistics, Katharine Bradbury found.

The jobless rate fell to 5 percent in June, the lowest since the attacks of September, 2001. "Current low rates of labor market participation thus potentially represent considerable slack in the U.S. labor market," she wrote.

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