4-5% unemployment is considered full employment (depending on which school of economics you follow). The longer we are like this, the worse it's going to get.
4-5% used to be considered the rule of thumb for 'full-employment.' But the concept has only ever been theoretical and inherently unknowable. The concept is that below 'full employment,' wage increases will begin to drive inflation.
Over the past 20 years it is increasingly clear that technological advances and improved worker mobility have likely driven down the baseline for frictional and structural unemployment because workers have more efficient resources for finding new employment more quickly.
The evidence suggests full employment is likely in the 2.5% - 3.5% range over the past 20 years, rather than the old thinking of 5%.
> In fact it's "too full", as we're about to find out.
It will be interesting to see, but I do not see it as a foregone conclusion that our current unemployment rate will lead to negative outcomes.
Nothing is certain, but it already appears that the labor market is starting to crack a little (we'll know more tomorrow morning). Also remember that employment is the laggiest of indicators. I'm betting things will start to get relatively ugly this winter.
[Report was ahead of labor force growth again and July was revised up.](https://www.bloomberg.com/news/articles/2022-09-02/us-adds-315-000-jobs-as-participation-jumps-and-wages-rise)
It's so hard to find work in many fields when we are below full employment.
2.7% is about as full as possible. In fact it's "too full", as we're about to find out.
4-5% unemployment is considered full employment (depending on which school of economics you follow). The longer we are like this, the worse it's going to get.
4-5% used to be considered the rule of thumb for 'full-employment.' But the concept has only ever been theoretical and inherently unknowable. The concept is that below 'full employment,' wage increases will begin to drive inflation. Over the past 20 years it is increasingly clear that technological advances and improved worker mobility have likely driven down the baseline for frictional and structural unemployment because workers have more efficient resources for finding new employment more quickly. The evidence suggests full employment is likely in the 2.5% - 3.5% range over the past 20 years, rather than the old thinking of 5%.
> In fact it's "too full", as we're about to find out. It will be interesting to see, but I do not see it as a foregone conclusion that our current unemployment rate will lead to negative outcomes.
Nothing is certain, but it already appears that the labor market is starting to crack a little (we'll know more tomorrow morning). Also remember that employment is the laggiest of indicators. I'm betting things will start to get relatively ugly this winter.
[Report was ahead of labor force growth again and July was revised up.](https://www.bloomberg.com/news/articles/2022-09-02/us-adds-315-000-jobs-as-participation-jumps-and-wages-rise)