Federal Reserve Board Governor Susan Bies told an audience at Duke University’s Fuqua School of Business this morning that the U.S. economy is “basically running at full employment.” Does this mean that the unemployment rate fell to zero percent over the long holiday weekend? Sadly, no. But it doesn’t mean that full employment isn’t its own mixed blessing.
In simplest terms, full employment is when everyone who is willing to work at the going wage for their type of labor is employed. It can be different percentages in different countries at different times, but it is always a number greater than zero percent. The OECD (Organization for Economic Cooperation and Development) estimated in 1999 that the “full-employment unemployment rate” in the U.S. was about 4 to 6.4 percent, which is why with the current unemployment rate of 4.6 percent, Biels called it as she did.
In 1944, President Franklin D. Roosevelt proposed “full employment” for Americans, declaring that having a job was a “basic human right,” yet Congress has stopped short of legislating full employment many times in the years since for the simple reason that if the private sector came up short of good jobs for those who wanted them, the U.S. government would be called in to fill the gap.
So why isn’t this fantastic news all around? Policy makers associate low unemployment with high wages; if talent is hard to come by, workers can drive up heir worth, employers respond by raising prices to cover labor costs, and an inflationary spiral will be set in place that is considered more damaging than a rising unemployment rate.
But, it doesn’t mean it isn’t a good time to be an U.S. worker, and an even better time to ask your bosses to show you the money.