The 3.6% unemployment rate is sending a misleading signal.

If the United States was actually at full employment, wage pressure should be sending salaries much higher. Wage increase have been so soft, barely keeping up with a 2% inflation rate. This is evidence of widespread underemployment, which is keeping a lid on wage pressures.

So says labor economist Danny Blanchflower. In our wide ranging Masters-in-Business conversation, the Dartmouth College professor of economics and author of Not Working: Where Have All the Good Jobs Gone? we discuss why most economists get this wrong.

He notes that the things that usually get blamed for low wage gains – globalization, automation, and the decline of unions – are now a given, the background to the economy. The big shift post-financial crisis has been an acceleration of this phenomenon. The ramifications include increased levels of pain, widespread dissatisfaction and the rise of popularism.

Blanchflower believes unemployment could bottom at 2.5%. He suggests economists are under-estimating the odds of a recession, and that the Fed should be aggressively cutting rates at this point in the cycle.

His favorite books are here; A transcript of our conversation is available here.

You can stream/download the full conversation, including the podcast extras on Apple iTunes, Bloomberg, Spotify, Google Podcasts, Overcast, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.

Next week, we speak with Josh Wolfe, co-founder and managing partner of Lux Capital. The venture firm was set up to support scientists and entrepreneurs who pursue unconventional solutions to the most challenging problems of our time.