Full Employment Papers

Full employment refers to a situation where nearly all the labor resources available in an economy are employed in productive engagements. At full employment, an economy produces output at its maximum possible level. Full employment does not mean all the labor resources get a job, still some people do not have a job in this situation. However, all of the unemployed in this situation are belong to the frictional and structural unemployment, and the unemployment duration is very short. Even in conditions of full employment, there is still a natural rate of unemployment. Structural unemployment refers to unemployment that exists due to a mismatch between the repertoire of potential employees and the needs of employers. Frictional unemployment exists when qualified workers are out of employment while they search for new employment. In a full …show more content…
In this situation, American firms were compelled to cut back on production. The cut in production need reduce the labor force. As the American economy has recovered and tended toward full employment, firms have resumed hiring and increased production. This has forced down the rate of cyclical unemployment. Aggressive monetary and fiscal policy has played a significant in returning aggregate demand to pre-crisis levels. In spite of this apparent recovery, the United States economy has still not achieved full employment. The Federal Reserve Bank of St.Louis- citing the Congressional Budget Office- estimates the Natural Unemployment Rate for the first quarter of 2015 at 5.39%. Simultaneously, the Bureau of Labor Statistics reported an employment rate of 5.7% for January 2015. From these figures, we can calculate a cyclical unemployment rate of 0.31 percentage points. This implies that the U.S. economy is still operating below full employment. Notwithstanding, the U.S. economy is close to achieving full recovery and