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

Merced’s Iconic Laura Fountain Returns to Splendor With $300K Restoration

DON'T MISS

If You Thought Trump Wasn’t Serious About Deportations, Look at His First Appointments

DON'T MISS

Biden EPA to Charge First-Ever ‘Methane Fee’ for Emissions Waste by Oil and Gas Companies

DON'T MISS

Trump Picks Former Arkansas Gov. Mike Huckabee to Be Ambassador to Israel

DON'T MISS

At the Pandemic’s Start, Americans Began Drinking More. They Still Are.

DON'T MISS

Last GOP Congressman Anchored in Democratic LA County Concedes in Race Against Former NASA Exec

DON'T MISS

Aid Groups Say Israel Misses US Deadline to Boost Humanitarian Aid Entering Gaza

DON'T MISS

Speaker Mike Johnson Says Republicans Are ‘Ready to Deliver’ on Trump’s Agenda

DON'T MISS

Wall Street Slips as the Trump Trade Cools

DON'T MISS

49ers Coach Kyle Shanahan Says Players’ Sideline Spat Has Been ‘Squashed’

UP NEXT

US Regulators Investigating Whether Engines on 1.4 Million Hondas Might Fail

UP NEXT

When to Catch the Last Supermoon of the Year

UP NEXT

Mattel Says It ‘Deeply’ Regrets Misprint on ‘Wicked’ Dolls Packaging That Links to Porn Site

UP NEXT

How Democrats Helped Trump

UP NEXT

Newsom Uses a Stunt to Position Himself as a Leader of Anti-Trump Resistance

UP NEXT

Trump to Target Iran’s Oil Trade in Renewed ‘Maximum Pressure’ Campaign

UP NEXT

4B Movement: After the Election, a Call for Women to Swear Off Men

UP NEXT

FBI Thwarts Iranian Murder-for-Hire Plan Targeting Donald Trump

UP NEXT

Wave of Racist Texts After Election Prompts FBI Scrutiny

UP NEXT

Americans Seek Fresh Start Abroad as Election Sparks Expat Interest

Trump Picks Former Arkansas Gov. Mike Huckabee to Be Ambassador to Israel

45 mins ago

At the Pandemic’s Start, Americans Began Drinking More. They Still Are.

1 hour ago

Last GOP Congressman Anchored in Democratic LA County Concedes in Race Against Former NASA Exec

1 hour ago

Aid Groups Say Israel Misses US Deadline to Boost Humanitarian Aid Entering Gaza

2 hours ago

Speaker Mike Johnson Says Republicans Are ‘Ready to Deliver’ on Trump’s Agenda

2 hours ago

Wall Street Slips as the Trump Trade Cools

2 hours ago

49ers Coach Kyle Shanahan Says Players’ Sideline Spat Has Been ‘Squashed’

2 hours ago

Cowboys QB Dak Prescott Will Have Season-Ending Surgery on Torn Hamstring

2 hours ago

Judge Delays Ruling on Whether to Scrap Trump’s Conviction in Hush Money Case

2 hours ago

Songwriters Hall of Fame Unveils Star-Studded 2025 Nominees, From Eminem to Janet Jackson

2 hours ago

Merced’s Iconic Laura Fountain Returns to Splendor With $300K Restoration

A landmark from days of old when Merced was known as “Fountain City” is back, fully restored for new generations to appreciate. ...

31 mins ago

31 mins ago

Merced’s Iconic Laura Fountain Returns to Splendor With $300K Restoration

36 mins ago

If You Thought Trump Wasn’t Serious About Deportations, Look at His First Appointments

44 mins ago

Biden EPA to Charge First-Ever ‘Methane Fee’ for Emissions Waste by Oil and Gas Companies

Republican presidential nominee former President Donald Trump talks with former Arkansas Gov. Mike Huckabee during a roundtable at the Drexelbrook Catering & Event Center, Tuesday, Oct. 29, 2024, in Drexel Hill, Pa. (AP Photo/Julia Demaree Nikhinson)
45 mins ago

Trump Picks Former Arkansas Gov. Mike Huckabee to Be Ambassador to Israel

1 hour ago

At the Pandemic’s Start, Americans Began Drinking More. They Still Are.

1 hour ago

Last GOP Congressman Anchored in Democratic LA County Concedes in Race Against Former NASA Exec

2 hours ago

Aid Groups Say Israel Misses US Deadline to Boost Humanitarian Aid Entering Gaza

2 hours ago

Speaker Mike Johnson Says Republicans Are ‘Ready to Deliver’ on Trump’s Agenda

Search

Send this to a friend