Questions and Answers   

What is the definition of full employment and at what unemployment rate is an area considered to be at full employment?

In last month’s issue (May 2007) I discussed the four major types of unemployment: cyclical, frictional, seasonal and structural. Often, an economy is considered to be at full employment when cyclical unemployment equals zero. That is, even at ‘full employment’, there will be some level of unemployment due to frictional, seasonal, or structural factors. As such, a goal of pursuing full employment is not the same as a goal of reducing unemployment to zero, because economists expect there to always be some level of unemployment due to such things as voluntary job searches and structural mismatches between labor skills and job requirements. Nationwide, full employment is probably consistent with an unemployment rate somewhere between 4.5 and 5.5 percent. Because of the larger structural problems in many rural economies of South Carolina, full employment in many parts of our state is probably something notably higher than it is for the nation as a whole.



 

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