We’re still 8.3 million jobs from full recovery

September 16, 2013, 7:00 PM UTC

FORTUNE – More than four years since the Great Recession officially ended, plenty of Americans are still feeling the worst of the economic downturn. Millions are still jobless, but it’s easy to forget that when the unemployment rate continues to fall.

Last month, the unemployment rate fell to 7.3% from 8.1% a year ago. That might signal progress, but the share of workers with jobs was 58.6%; it has remained close to that for several years. The unemployment rate is inherently flawed and isn’t the best measure of economic progress; it counts only those with jobs or actively looking for work.

And in a frustratingly slow economic recovery that has discouraged countless workers, it risks ignoring these missing workers — an estimated 6 million, according to the Brookings Institution’s Hamilton Project.

The Washington-based think tank has come up with what it calls the “jobs gap,” or the number of jobs it would take to offset the effects of the Great Recession. Factoring in the millions of jobs lost during the Great Recession and the number of jobs needed to absorb new workers, the nation needs 8.3 million jobs to fully recover from the recession.

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The economy isn’t even halfway there, says Adam Looney, policy director of The Hamilton Project. If it continues creating 169,000 jobs a month, as it did in August, it won’t be until July 2020 before the jobs market fully recovers. It gets worse: Under the best years of job creation in the 2000s, when the economy added about 208,000 jobs a month, the jobs gap would close on August 2018, according to The Hamilton Project’s analysis. And under a more optimistic rate of 321,000 jobs a month, seen during the best years of job creation in the 1990s, the economy will reach pre-recession employment levels in June 2016.

That’s a lot longer than what policymakers have suggested, Looney adds.

Increasingly, the definition of “recovery” becomes unclear.

The Federal Reserve has said it will reconsider its ultra-low interest rate policy when the unemployment rate falls to 6.5%. The economy would get there in 2014 if it creates jobs at the pace it has over the past year. That’s earlier than Looney’s estimates, but that doesn’t count the millions of workers who have dropped out of the labor pool.

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Just because there are fewer people officially counted in the labor pool shouldn’t give the economy (or policymakers) a hall pass for accepting a new normal of fewer jobs, Looney adds. A portion of older workers aging into retirement explains the decline of the labor-participation rate, but young and middle-aged workers have also been dropping out — that is, an estimated 2.1 million 25 to 44-year-olds in their prime working years.

When the Fed meets Tuesday and Wednesday, policymakers will decide whether the economy is strong enough to begin tapering $85 billion in monthly bond purchases. In doing so, they’ll likely consider a host of economic uncertainties, such as rising U.S. interest rates, troubling events abroad and another budget battle in Washington.

Hopefully, though, they’ll put America’s missing workers up there.