Full Employment

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Linenberger 1 Gabriela Linenberger Dr. Prera EonS 102 Assignment 2 Full Employment Full employment is a critical economic concept that reflects the health and stability of the labor market. When determining whether the United States has reached a point in which all those who are willing and able to work are working without causing inflation, the natural and actual rates of employment both must be considered as full employment can only be reached when the natural rate of unemployment is equal to that of the actual unemployment rate. This includes the analysis of frictional and structural unemployment which correlates to the difference between the two rates of unemployment. Currently, the United States is not at full employment. The natural unemployment rate represents the lowest level of unemployment that an economy can sustain without causing upward inflation pressure, essentially when the economy is growing and healthy. According to the Federal Reserve Bank of St. Louis, in the first quarter of 2023, the noncyclical rate of unemployment was at 4.42806 and is estimated to continue dropping. This considers both frictional, a person out of work due to moving from one job to another, and structural unemployment, a mismatch of skills desired by employers and provided by workers, while excluding cyclical unemployment as cyclical unemployment involves the ups and downs of the economy. By only considering the part of the population that is unemployed and actively seeking work, the natural rate differs from the actual rate while still being able to be within a similar range.

Linenberger 2 The actual unemployment rate involves both U3 and U6. This differs from the natural rate as it takes into consideration those who are unemployed and not seeking work, which can be viewed as a more accurate representation. This includes economic downturns such as when demand for labor decreases due to reduced economic activity. The Federal Reserve Bank of St. Louis concluded that in the first quarter of 2023, the unemployment rate stands at 3.5, a significant low that is estimated to continue going lower. Notably the actual unemployment rate is lower than the natural rate which can happen during economic expansions. When assessing all the information presented, it can be determined that our economy is not at full employment. Full employment addresses underemployment and the quality of employment opportunities available. When analyzing the Federal Reserve Bank of St. Louis graphs on both the natural and actual unemployment rates, the current rates are at an all-time low with predictions of declining lower with a slight increase in later years. That leaves room for further decline without recession showing that the United States has not yet reached said point. Determining whether the United States economy has reached full employment based on natural and actual unemployment involves many different unemployment factors. reaching full employment is not only about reducing the official unemployment rate but also addressing underemployment and labor market disparities. The concept of full employment is not static and can change over time as economic conditions evolve. Considering these factors, it can be concluded that the United States is not at full employment. Citations  “Noncyclical Rate of Unemployment.” FRED, fred.stlouisfed.org/graph/?g=17ZCz. Accessed 12 Oct. 2023.

Linenberger 3  “Unemployment Rate.” FRED, fred.stlouisfed.org/graph/?g=17ZCw. Accessed 12 Oct. 2023.  “Lesson Summary: Unemployment (Article).” Khan Academy, Khan Academy, www.khanacademy.org/economics-finance-domain/ap-macroeconomics/economic- iondicators-and-the-business-cycle/unemployment/a/lesson-summary-unemployment. Accessed 12 Oct. 2023 .  Saphir, Ann. “U.S. Economy Has Not Reached Fed’s Full Employment Goal -SF Fed Report.” Reuters, Thomson Reuters, 7 Feb. 2022, www.reuters.com/article/usa-fed- employment/u-s-economy-has-not-reached-feds-full-employment-goal-sf-fed-report- idUKL1N2UI1MJ .  Learning, Lumen. “Macroeconomics with Prof. Dolar.” Lumen, courses.lumenlearning.com/oldwestbury-wm-macroeconomics/chapter/structural- employment/. Accessed 12 Oct. 2023.

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