Question: Wouldn’t full employment mean that everyone is employed? Wouldn't that be full employment? Well…no. It’s a government statistic, so full…isn’t really full. Its full-ish. And full is probably impossible anyway, because there will always be college students, part-time Uber drivers, derelicts and, well…actors.
So when economists talk about full employment, they mean that everyone who is actively seeking work is generally finding work...but it recognizes that a lot of people have either given up the hunt and are happy living on the equivalent of replacement value of 48 grand-a-year of welfare, or they’re, ya know…off the grid. The equilibrium notion is the hard part to conceive of here. When "almost every single living being" is employed, it likely means that the economy is on fire (in the good way). Tons of demand for...stuff. Tons of shortages of labor and supplies. And it also probably means that we have roaring inflation. Which is…bad. There is a balance of employed and unemployed, which makes for a stable set of parameters that keep the people employed who want to be employed. And it keeps inflation at small numbers, such that old people who generally retire on bonds aren’t forced to live inhuman lives in their station wagons parked on the side of the road, because roaring inflation at 6% has made their 2%-a-year bond investment returns destroy most of the buying power of their life savings.
Historically, economists have generally targeted 95% as the full employment equilibrium number. Or 5% unemployment. In other words, at that level, there is low, or just very modest inflation. And the employment-seeking masses have generally found what they’ve been looking for. Like Bono. Turns out he was just looking for his car keys. Go figure.
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Finance: What is the Unemployment Rate?15 Views
finance a la shmoop what is the unemployment rate so negative like
shouldn't it be the employment rate at least that way we'd have a bigger number
and bigger is better in the u.s. right well anyway the unemployment rate in
this country is tracked carefully because it's one of the Canaries in the
mine shaft giving us an early heads-up on the direction of the economy well [canary hopping in cage in mineshaft]
jobs are generally highly volatile in a given range and the government copiously
inspects this data as it affects so many other things principally the costs of
renting money has set out by the Fed because high employment stimulates
inflation and low does the opposite well the government's gonna ask is the
unemployment rate shrinking too fast I eat everyone's getting jobs well if so [government officials in conference]
then beware inflation is coming which historically has motivated the Fed to
raise interest rates in response or constrict the supply of cash out there
and the opposite is true as well one of the big cocktail party conflicts and if
you find yourself at a cocktail party debating this notion make like the
Jordan Peele movie and get out but if you can't and you must debate well there
is a quote natural rate unquote of unemployment of around five or six
percent yeah zero percent unemployment ain't never
gonna happen generally the higher the unemployment rate the worse shape the
economy is in but remember the unemployment rate doesn't tell the whole
story the government can help create a bunch of temporary or low-paying jobs
too cosmetically raise the employment rate in the short term like ahead of an [happy government officials in conference]
election but the quality of those jobs is probably not great like think temp
workers at the DMV well after a while of longer term unemployment some people [long line at the DMV]
will just give up hunting for jobs and if they don't even go on indeed or
Glassdoor looking for work so they're kind of permanently in the unemployment
numbers so the unemployment rate might seem to be a bit less dire in that case [unemployed people holding up cardboard signs]
but in fact well there might still be a lot of people who needed jobs out there
we don't know we're just looking for some numbers to help us direct
understanding of where the economy has gone and help us then tweak things so
interest rates are optimized at the inflation numbers that we want to hit
got it not everyone is qualified to stick that thing on the back of your
license plate that shows you red yeah a whole lot of government workers I [hand adds stickers on back of license place]
guess do that now bad times
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