Please ensure Javascript is enabled for purposes of website accessibility
What You Really Need To Know About Latest Jobs Report
The-Conversation
By The Conversation
Published 7 years ago on
May 4, 2018

Share

The latest jobs report has gotten a lot of analysts, policymakers and talking heads once again asking whether the U.S. is at full employment.

Portrait of Ohio State economics professor Jay L. Zagorsky
Opinion
Jay L. Zagorsky
The Bureau of Labor Statistics reported on May 4 that the U.S. unemployment rate fell to 3.9 percent, which is the lowest level since December 2000.
The unemployment rate includes anyone 16 or older who is actively searching for work in its calculation, which means students, retirees and others not in the labor force are excluded.
Does this mean the economy is at full employment? What is full employment anyway?
To the typical person on Main Street, the idea of full employment usually means everyone in the country is working, which would imply a jobless rate of essentially zero. This has never happened. The lowest unemployment rate the U.S. ever achieved was 1.2 percent in 1944. That was during the middle of World War II, when millions of men were drafted to fight and their jobs were filled by women.
This popular concept sounds nice, but, to economists like me, it misses the mark. Even in a fully employed, robust economy, there will always be a certain number of people who have given up looking for work, who are between jobs or whose skills are temporarily not needed.
 

Essentially, the idea of full employment is that so few workers are available that companies need to begin raising wages to attract help.
Economists technically define full employment as any time a country has a jobless rate equal or below what is known as the “non-accelerating inflation rate of unemployment,” which goes by the soporific acronym NAIRU.
Estimates of the measure are based on the historical relationship between the unemployment rate and changes in the pace of inflation. If the unemployment rate is below this number, the economy is at full employment, businesses cannot easily find workers, and inflation and wages typically rise. If not, then there are too many workers in need of a job, and inflation remains low.

Economists Puzzled by Stagnant Wages

At the moment, the Congressional Budget Office puts NAIRU at 4.6 percent, a little above the 3.9 percent unemployment rate. That means the U.S. is at full employment – and that wages should be going up. But until recently, they haven’t gained much, which has puzzled many economists.
Besides the impact on wages, another reason it’s useful to understand the definition of full employment is because maintaining it is one of the Federal Reserve’s key mandates when setting interest rates. The central bank tends to lower rates when unemployment is relatively high and raise them when it believes the economy is at full employment and wages are beginning to go up.
In other words, full employment isn’t when everyone has a job. Instead, it is when inflation starts to rise because businesses cannot find enough workers.
The ConversationWhile the U.S. may be technically at full employment, according to the definition, I won’t be convinced until paychecks start increasing.
Jay L. Zagorsky, Economist and Research Scientist, The Ohio State University
This article was originally published on The Conversation. Read the original article.

DON'T MISS

What Are Fresno Real Estate Experts Predicting for 2025 and Beyond?

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

Sinner Bids for His First French Open Title Against Defending Champion Alcaraz

DON'T MISS

Coco Gauff Defeats Top-Ranked Aryna Sabalenka in 3 Sets to Win Her First French Open Title

DON'T MISS

Texas Beats Texas Tech in 3rd Game of WCWS to Win Its 1st National Championship

DON'T MISS

Conforto Comes Through, Dodgers Rally in 8th for Victory Abetted by Mets Mishap

DON'T MISS

Giants Beat the Slumping Braves in 10 Innings on a Wild Pitch

DON'T MISS

Trans Troops, Facing a Deadline, Opt to Stay and Fight the Ban

DON'T MISS

Can This 14-Year-Old Football Star Become a High School Millionaire?

DON'T MISS

Trump EPA Moves to Roll Back Rules Projected to Save Billions of Dollars and Thousands of Lives

DON'T MISS

Valley Foster Care Agencies Are Facing an Insurance Crisis and Possible Closure

DON'T MISS

World’s Largest Almond Processor Will Shutter Sacramento Plant. 600 Workers Impacted

UP NEXT

FDA’s AI Assistant ‘Elsa’ Fails Its First Day on the Job

UP NEXT

8 Ways Musk and Trump Could Inflict Pain on Each Other

UP NEXT

D-Day Veterans Return to Normandy to Mark 81st Anniversary of Landings

UP NEXT

Lambda Legal, a Nonprofit Supporting LGBTQ+ Rights, Exceeded Fundraising Goal by $105M

UP NEXT

California’s Deficit Dilemma: Cut Spending, Borrow Money or Raise Taxes?

UP NEXT

We Are Being Governed by the Trump Organization Inc.

UP NEXT

Trump Threatens Musk’s Government Deals as Feud Explodes Over Tax-Cut Bill

UP NEXT

California’s Economy Is Just Limping Along. Why Is Newsom Always Boasting?

UP NEXT

Really, Secretary Rubio? I’m Lying About the Kids Dying Under Trump?

UP NEXT

After Years of Undrinkable Water, Our Rural California Community Finally Has Hope

Conforto Comes Through, Dodgers Rally in 8th for Victory Abetted by Mets Mishap

52 minutes ago

Giants Beat the Slumping Braves in 10 Innings on a Wild Pitch

1 hour ago

Trans Troops, Facing a Deadline, Opt to Stay and Fight the Ban

2 hours ago

Can This 14-Year-Old Football Star Become a High School Millionaire?

3 hours ago

Trump EPA Moves to Roll Back Rules Projected to Save Billions of Dollars and Thousands of Lives

3 hours ago

Valley Foster Care Agencies Are Facing an Insurance Crisis and Possible Closure

3 hours ago

World’s Largest Almond Processor Will Shutter Sacramento Plant. 600 Workers Impacted

17 hours ago

Trump Eyes Major Funding Cuts for California, Including All Public Universities

18 hours ago

Farming Regulation Costs Rise 1,300% Since 2006: Cal Poly

18 hours ago

Southern California Air Regulators Weigh a Plan to Phase Out Gas Furnaces and Water Heaters

19 hours ago

Sinner Bids for His First French Open Title Against Defending Champion Alcaraz

PARIS — Top-ranked Jannik Sinner has not yet dropped a set in his bid to win the French Open for the first time. Defending champion Carlos A...

39 minutes ago

39 minutes ago

Sinner Bids for His First French Open Title Against Defending Champion Alcaraz

43 minutes ago

Coco Gauff Defeats Top-Ranked Aryna Sabalenka in 3 Sets to Win Her First French Open Title

47 minutes ago

Texas Beats Texas Tech in 3rd Game of WCWS to Win Its 1st National Championship

52 minutes ago

Conforto Comes Through, Dodgers Rally in 8th for Victory Abetted by Mets Mishap

1 hour ago

Giants Beat the Slumping Braves in 10 Innings on a Wild Pitch

3 hours ago

Trans Troops, Facing a Deadline, Opt to Stay and Fight the Ban

4 hours ago

Can This 14-Year-Old Football Star Become a High School Millionaire?

4 hours ago

Trump EPA Moves to Roll Back Rules Projected to Save Billions of Dollars and Thousands of Lives

Help continue the work that gets you the news that matters most.

Search

Send this to a friend