What Is Full Employment?
Go anywhere in the country today and employers will tell you it’s hard to find workers — harder than it’s been in a while, harder than they expected it to be, and certainly harder than they would like it to be. Many worry that this will persist, that the labor market is already really tight and will get even tighter as the economy recovers.
But there are almost 10 million people who are unemployed and even more on the sidelines. These are people who worked before the pandemic and likely have the skills to work today. Of course, myriad factors are tempering labor supply at the moment — the need to care for children, fears of COVID, generous unemployment benefits. But there is no reason to expect those to be permanent or even highly persistent features of the labor market.
Indeed, we learned this in the aftermath of the Great Recession. The downturn put millions of prime-age men and women out of work (see Figure 1). Many believed that this would never reverse, that the employment rate would be permanently lower, reflecting skill deficiencies, scarring from long-term unemployment, early retirements, disability, and even changes in attitudes toward work, meaning less interest.
But none of those factors proved to be binding. As the economy improved, workers came off the sidelines. And year after year, the employment rate rose, eventually surpassing its pre-recession peak (see Figure 1).
The lesson is simple: Americans want to work and it would be a mistake to assume otherwise.
Figure 1: U.S. employment to population ratio for people ages 25–54
After the Great Recession, recovery brought people ages 25-54 back to work from 2012 until the pandemic in 2020. Another recover is under way this year, 2021. Source: Bureau of Labor statistics, seasonally adjusted
Chief Marketing Officer | Product MVP Expert | Cyber Security Enthusiast | @ GISEC DUBAI in May
2yMary, thanks for sharing!
Chairman of the Trust
3yFull employment is a couple of words. As a Fed agent it connotes contributing income taxes. Volunteer work is not employment though there are more people doing that tax free activity because pay is not a permanent motivator. So max employment will never be reached in terms of 100% of the population. Now price stability is a better realistic achievable target.
Dream, Plan, Do
3yI think we will have to wait and see. Habits of behavior are built by multiple repetitions over a period of time. This is just the second completely unprecedented intervention (rescue) by the federal.government in one generation. Clearly, internal/personal incentives remain. The question is what is happening with external/social incentives to work. I suspect that this aggregate data contains a number of fascinating and important stories.
Senior Communication Professional
3yI believe a big problem is the bottleneck in talent acquisition processes. They look for unicorns.