NC State Ag Economist Dr. Mike Walden – “What is Full Employment?”


Mary:  I’m Mary Walden, with economist MW, welcoming you to the economic perspective. Today’s program asks, what is full employment?   Mike, as the national unemployment rate falls under 5%, there is now talk of the nation reaching full employment.  What exactly does this mean, and what are the implications?

Mike:  Summary Answer

  1. Doesn’t mean that everyone who wants a job has a job, or that everyone who can work is working
  2. Instead, has a more subtle definition in economics
  3. Means the lowest level of unemployment that won’t spark higher inflation
  4. Comes out of the Federal Reserve, which has a dual mandate of keeping both unemployment and inflation low
  5. So the concept tells the Fed the lowest rate of unemployment that won’t spark higher inflation
  6. Some economists argue there is not a tradeoff in the long-run
  7. But more importantly, raise the issue of whether policymakers should consider a tradeoff between the two goals of low unemployment and low inflation
  8. I’m MW

Mary:  And I’m Mary Walden for the North Carolina Cooperative Extension Service