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Atlanta Fed Suggests We’re Still Far From Full Employment

September 27th, 2015 | Isaiah J. Poole

Isaih J. PooleThe Federal Reserve’s decision last week not to increase interest rates was preceded by a considerable amount of commentary that our economy, with a 5.1 percent overall unemployment rate, was close to “full employment.”

If an economy has reached “full employment” at a rate of about 5 percent unemployment, that’s the same as saying that what we have now is about as good as it will ever get. That suggests that unemployment rates among African Americans and Latinos are doomed to be up to twice that of white Americans, or that the 10 states plus the District of Columbia where unemployment rates exceeded 6 percent in August will never catch up unless it’s at another state or region’s expense.

But this is not as good as it can get, according to two policy analysts at the Atlanta Fed this week.

The paper by John Robertson and Ellyn Terry published this week suggests looking beyond the unemployment rate and the employment-to-population ratio to what they call the utilization-to-population ratio. That measure, which they call the “ZPOP,” is defined as “the share of the working-age population that is working full time, is voluntarily working part-time, or doesn’t want to work any hours.”

Currently, that is about 91 percent of the working-age population. The remainder, currently about 9 percent, “are a roughly even mixture of the unemployed, those not in the labor force but wanting to work, and those working part-time but wanting full-time hours.”

The ZPOP is “currently about 1.5 percentage points below its prerecession level” of around 93 percent. When the ZPOP was at that level, just before the 2008 market crash, the overall unemployment rate was hovering around 4.7 percent. As their chart shows, the ZPOP almost reached 94 percent before the 2001 recession, which ended a period of 4 percent unemployment.

There’s a lot of wonkery here, but their conclusion is simple: The economy is in a far better state than it was during the recession at fully utilizing its labor force, but there is still in their words “some way to go.”

Mark Thoma at CBS Moneywatch makes the point that even this measure falls short in measuring the true state of the job market. “Just because a worker is employed doesn’t mean he or she is doing what they’re best at or employed in their most productive occupation,” he writes. “If an unemployed engineer takes a job waiting tables to feed the family, that worker will be defined as fully employed, but that worker’s potential is hardly fully utilized.”

He goes on to write, “Measuring how well workers are matched to jobs is extremely difficult, but it’s a consideration worth thinking about when trying to figure out how close the economy is to its potential output.”

That’s why the best policy would be to ignore the economists and policymakers who look at 5 percent unemployment as a signal to declare that the job market is healthy. Full employment is nothing less than every person who wants a job being able to find a job – especially the kind of job for which they are suited at the wages they deserve. Anything less wastes the potential of millions of people who are on the economy’s sidelines – and that reality demands far more of our attention than conjured-up fears of inflation.

This blog was originally posted on Our Future on September 23, 2015. Reprinted with permission.

About the Author: Isaiah J. Poole has been the editor of OurFuture.org since 2007. Previously he worked for 25 years in mainstream media, most recently at Congressional Quarterly, where he covered congressional leadership and tracked major bills through Congress. Most of his journalism experience has been in Washington as both a reporter and an editor on topics ranging from presidential politics to pop culture. His work has put him at the front lines of ideological battles between progressives and conservatives. He also served as a founding member of the Washington Association of Black Journalists and the National Lesbian and Gay Journalists Association.

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One Response to “Atlanta Fed Suggests We’re Still Far From Full Employment”

  1. Andrew Says:

    Wages are still far too low to consider even those employed to their knowledge and skill capacities to be utilized. Compensation which does not cover continued investment in skill discourages continued productivity and causes those who would be considered utilized to fall from such a state, with several transitioning in and out as they are encouraged to be productive and then discouraged from remaining so after their value added is not shared with them. In many cases, workers invested in themselves and find themselves struggling to afford the costs while beneficiaries of their unique capacities benefit not then and cycle out of utilization in discouragement. Many individuals yet continue maintaining and updating their skills, talents, knowledge and expertise even while utilization does not give incentive. It is shear passion or hopeful optimism – both which I see as finite and irreplaceable, with discouragement and burn-out threatening to overcome.

    The engineer waiting tablets is probably doing so because feeding the family is made possible by it, or is a match that gives a day of interacting with a humanizing crowd. Or, the engineer was served the lesson that stress kills.

    I remember in 2013 reading about woman scientists and engineers leaving jobs in droves. It wasn’t just the women – the men left with them… Where did they go? Home, to sleep. What are they doing now?

    Maintaining underutilization was many coworkers I’ve known’s method, and they were usually much older and wiser. Hidden skills are likely locked away, unoffered to the economy which won’t pay the price for them.

    Sometimes one would like full time work and isn’t selling it cut rate, not incapable of finding it, but incapable of finding it that’s worth it.

    Of course, what is full time and $8/hour? Considered utilized? Poor.

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