Above Full-Employment Equilibrium

  

Question: Wouldn’t full employment mean that everyone is employed? Wouldn't that be full employment? Well…no. It’s a government statistic, so full…isn’t really full. Its full-ish. And full is probably impossible anyway, because there will always be college students, part-time Uber drivers, derelicts and, well…actors.  

So when economists talk about full employment, they mean that everyone who is actively seeking work is generally finding work...but it recognizes that a lot of people have either given up the hunt and are happy living on the equivalent of replacement value of 48 grand-a-year of welfare, or they’re, ya know…off the grid. The equilibrium notion is the hard part to conceive of here. When "almost every single living being" is employed, it likely means that the economy is on fire (in the good way). Tons of demand for...stuff. Tons of shortages of labor and supplies. And it also probably means that we have roaring inflation. Which is…bad. There is a balance of employed and unemployed, which makes for a stable set of parameters that keep the people employed who want to be employed. And it keeps inflation at small numbers, such that old people who generally retire on bonds aren’t forced to live inhuman lives in their station wagons parked on the side of the road, because roaring inflation at 6% has made their 2%-a-year bond investment returns destroy most of the buying power of their life savings. 

Historically, economists have generally targeted 95% as the full employment equilibrium number. Or 5% unemployment. In other words, at that level, there is low, or just very modest inflation. And the employment-seeking masses have generally found what they’ve been looking for. Like Bono. Turns out he was just looking for his car keys. Go figure.

Related or Semi-related Video

Finance: What is Above Full Employment E...20 Views

00:00

Finance a la shmoop what is above full employment equilibrium? question wouldn't

00:08

full employment mean that everyone who wants a job is employed wouldn't that be

00:14

full employment well no it's a government statistics so full isn't [Government worker in office]

00:18

really full it's you know full-ish and full is probably impossible anyway

00:24

because there will always be college students part-time uber drivers [Students graduating and uber driver appears]

00:27

derelicts and you know actors so when economists talk about full employment

00:31

they mean that everyone who is actively seeking work is generally finding work

00:37

but it recognizes that a lot of people have either given up the hunt and are

00:41

happy living on the equivalent of replacement value of you know 48 grand a [Woman at the desk of a cafe]

00:45

year of welfare or they're you know off the grid

00:48

well the equilibrium notion is the hard part to conceive here when "almost

00:53

every single living being" is employed it likely means that the

00:58

economy is on fire in the in the good way tons of demand for stuff tons of

01:04

shortages of labor and supplies and it also probably means that we have roaring

01:08

inflation which is generally bad there is a balance of employed and unemployed [employed and unemployed workers on a scale]

01:13

which makes for a stable set of parameters that keep the people employed

01:17

who want to be employed and it keeps inflation at small numbers such that old

01:22

people who generally retire on bonds aren't forced to live inhuman lives in

01:27

their station wagons parked on the side of the road because roaring inflation at

01:32

6% has made their 2 percent a year bond investment returns destroy most of the

01:36

buying power of their life savings belt historically economists have generally

01:41

targeted 95 percent as the full employment equilibrium number or 5

01:45

percent as the unemployment rate they're shooting for in other words at that

01:49

level there is low or just very modest inflation and the employment seeking [Man discussing employment equilibrium]

01:55

masses have generally found what they've been looking for you know like bono

01:59

turns out he was just looking for his car keys.... go figure..[Bono singing into microphone]

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