We’re Getting Awfully Close to Full Employment

Officials at the Fed are on record as believing that a jobless rate of around 4.7 percent is the level they seek in the longer run, and we’re now comfortably below that.

Broader measures of unemployment tell the same story. The so-called U-6 rate, which captures people who are working part-time but want a full-time job, and those who would like a job but have given up looking out of frustration, is also back down to its level before the last recession. It fell to 8.6 percent in April from 8.9 percent, and the last time it was lower was November 2007.

Taken in isolation, these numbers would seem to suggest that the economy is most certainly at full employment and maybe even running a little hot — that is, revving faster than will be possible in the long run without just fueling inflation.

More Prime-Aged Americans Are Working

But the ratio has not yet returned to pre-recession levels.

But we can’t take the unemployment rate in isolation. Other data, including in the April report, show a more nuanced picture, one that suggests there is room to run. One of the central economic problems of our time is prime-aged adults, especially men, who are out of the work force entirely and aren’t even looking for a job. The number of people not in the labor force actually climbed by 162,000 in April, and the proportion of the population in the labor force edged down a tenth of a percent.

A single month’s moves may well be random blips, but if you look at these and related numbers over a longer horizon, it’s hard to find a discernible trend. The labor force participation rate was 62.8 percent in April 2016 and 62.9 percent in April 2017.

There can be a lot of churn beneath those numbers. Baby boomers who are retiring are being offset by younger workers…

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