3 ms·

Full employment is "the condition in which virtually all who are able and willing to work are employed." Arguably, because the commonly cited U3 unemployment r

Full employment is "the condition in which virtually all who are able and willing to work are employed." Arguably, because the commonly cited U3 unemployment rate is the percentage of people who are able to and actively looking for work and unable to find it, any unemployment rate above zero means that you're not at full employment. That said, because even in the "best" economies that we've ever actually experienced there is always at least some level of job loss and it's always going to take at least some amount of time to find a new job, many people / economists tend to view full employment as something more like "the lowest level that we can realistically expect unemployment to reach given some unavoidable level of job churn". This is why you see statements like "4% unemployment is full employment". Personally, I don't agree with this redefinition because I think it is at least _theoretically_ possible to get to a state where those who lose their jobs due to layoffs etc. are employed again extremely rapidly and the rate ends up being much closer to zero.

mywittyname 7y ago
> Personally, I don't agree with this redefinition because I think it is at least _theoretically_ possible to get to a state where those who lose their jobs due to layoffs etc. are employed again extremely rapidly and the rate ends up being much closer to zero. This has never happened though. U3 being the Official Rate appears to because it's the metric comprised of orthogonal data points. The U4-6 rates are linearly related to the U3 rate; when the U3 doubles, so does the U5 and U6, likewise when the U3 halves. Which makes reporting the U4+ pointless for trending, it doesn't matter if you pick the rate that goes from 4% to 8% or the one from 7% to 14%. The U1 & 2 rates do not demonstrate this correlation. The U1 can remain flat while the U2 spikes because they represent different pools of people. So while we intuitively think that including discouraged workers make since, from an analytical perspective, including them doesn't give us any more predictive power than we had before. Calling sub-5% U3 unemployment "full employment" is more of an empirical definition than a logical one; it just happens to be the lowest point we've ever measured.

mywittyname 7y ago

> Personally, I don't agree with this redefinition because I think it is at least _theoretically_ possible to get to a state where those who lose their jobs due to layoffs etc. are employed again extremely rapidly and the rate ends up being much closer to zero. This has never happened though. U3 being the Official Rate appears to because it's the metric comprised of orthogonal data points. The U4-6 rates are linearly related to the U3 rate; when the U3 doubles, so does the U5 and U6, likewise when the U3 halves. Which makes reporting the U4+ pointless for trending, it doesn't matter if you pick the rate that goes from 4% to 8% or the one from 7% to 14%. The U1 & 2 rates do not demonstrate this correlation. The U1 can remain flat while the U2 spikes because they represent different pools of people. So while we intuitively think that including discouraged workers make since, from an analytical perspective, including them doesn't give us any more predictive power than we had before. Calling sub-5% U3 unemployment "full employment" is more of an empirical definition than a logical one; it just happens to be the lowest point we've ever measured.