A thriving informal economy skews official US picture

The shadow economy in the United States, consisting of off-the-books workers and unreported income, is booming.

According to a recent study, about $2 trillion in underground economic activity took place in the United States last year.

The informal sector includes everything from prostitutes to construction day laborers who are in the country illegally. Whatever their field, they are not paying taxes on their income.

"I think the underground economy is quite big in the U.S.," Alexandre Padilla, associate professor of economics at Metropolitan State University of Denver, told CNBC.com. "Whether it's using undocumented workers or those here legally, it's pretty large."

This thriving underground economy may help explain the slow-motion recovery.

According to Bloomberg.com: "Such informal arrangements, while providing a safety net of last resort for workers ... also may provide answers to puzzling discrepancies in economic data. One example: Explaining why retail sales have outpaced gains in reported income for almost four years, said Bernard Baumohl, chief global economist at the Economic Outlook Group LLC in Princeton, New Jersey."

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