Getting to Full Employment By Lowering the Goalpost

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Tuesday, 11 March 2014 19:10

The folks controlling economic policy are apparently getting frustrated with their inability to restore the economy to full employment. So it seems that their answer is to redefine full employment to make the task easier, or so Evan Soltas tells us in a Bloomberg View piece today.

Soltas notes that the quit rate is not obviously out of line with the unemployment rate, which he adds is "close to most estimates of unemployment's natural level." It's worth noting that the quit rate used to be much higher in the years before the recession, and that was not a period associated with accelerating inflation, the normal indicator for an unemployment rate that is lower than can be sustained.

quit rates

                                            Source: Bureau of Labor Statistics.

In fact, at no point in the 2001 recession or subsequent period of weak employment growth did the quit rate ever fall as low as it is now. So it would take some heavy duty re-defintion to get us to be near full employment with the current labor market situation.