Understanding underutilization

" Underutilization" is a compound word only an economist would love.

The leftovers in your fridge -- that's an underutilized dinner. An empty nester's extra bedroom -- underutilized real estate. Using your smartphone only to make phone calls -- you're underutilizing the technology.

For several years, the Federal Reserve has focused on the "underutilization of labor resources" as a key reason for keeping interest rates at zero. It did it again last week. Even while the unemployment rate has fallen and hundreds of thousands of new jobs have been created, the slack in the job market has been a point of concern.

It's not just the people who used to work and want to work but have given up looking for work. It's also people who are working temporary jobs because that's all they can find. When the Fed mentions labor underutilization, these are the Americans it is talking about. As part of the monthly jobs data, the Bureau of Labor Statistics publishes an entire table it calls "Alternative measures of labor underutilization." By the widest measure, the U.S. total unemployment rate in September was 10 percent. That's almost twice the "official" rate.

This slack helps explain the lack of wage growth. Sure, some labor markets are tight and some professions are enjoying pay raises, but throughout the economy, paychecks are not rising significantly, if they are at all.

October's employment data will be released Friday. It will include another round of statistics of underutilized workers. A better understanding why these workers are dormant would be of great utilization.

Tom Hudson, financial journalist, hosts "The Sunshine Economy" on WLRN-FM in Miami, where he is the vice president of news. Follow him on Twitter@HudsonsView.

This story was originally published October 30, 2015 at 7:08 PM with the headline "Understanding underutilization ."