The unemployment rate is low. Are we at full employment? : Planet Money : The Indicator from Planet Money Unemployment is at 3.9%. Is this full employment? Some Americans aren't so sure. We look at this complex situation through the eyes of someone who has been job hunting for a long time.

Why full employment doesn't mean everyone has a job

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This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.


And I'm Darian Woods. And it is, Stacey, Jobs Friday.

VANEK SMITH: It is Jobs Friday, which is one of our favorite days of every month here at THE INDICATOR.

WOODS: That's right.

VANEK SMITH: Today, of course, is when the Bureau of Labor Statistics releases the latest in who is getting hired in America.

WOODS: And the number for December is 200,000 new jobs or to be precise, 199,000.

VANEK SMITH: Yes, and that is good. It's not great. And it is, I would venture to say, definitely not air-horn territory. But, Darian, I feel like I'm always bringing the room down.

WOODS: That's OK.

VANEK SMITH: And given the pandemic's latest wave, omicron, it is maybe understandable that hiring was not going, like, full steam ahead.

WOODS: That makes a lot of sense. But, you know, there is one number on this report that on its face looks pretty nice - the unemployment rate. According to the bureau's latest household survey, the unemployment rate is down to 3.9%, which is on the low end of things historically.

VANEK SMITH: Yeah, it's definitely a good unemployment rate. And, you know, it might have even passed something that economists will sometimes talk about in hushed tones - so-called full employment.

WOODS: And employers - they're crying out for workers, and they would say that we're at that full employment. But full employment might not mean candy and roses for everybody.


WOODS: Look. If we're at 3.9%, you know, that's still millions of Americans out of work.

VANEK SMITH: Yes, and this kind of messy picture really gets at the heart of how economists debate the state of the economy. So today on the show - full employment. We speak with someone who is not feeling the rebounding labor market. And we ask, are we at full employment? Is this really as good as it gets?


WOODS: Unemployment is at 3.9%, which is quite low by historical standards. But not everyone's feeling that.

JILL ARMITAGE: It's really hard. And, you know, it really impacts real life.

WOODS: Jill Armitage (ph) has been looking for a job for a long time. She left a voice memo for Planet Money last year about her job search.

ARMITAGE: So I've been unemployed for two years now, which is astounding and terrible.

WOODS: So we at THE INDICATOR called her up to learn more. We thought that her story could help us understand whether we were really at full employment right now.

VANEK SMITH: A few years back, Jill worked at a very small nonprofit, but she was not feeling challenged in her job. And then she heard about a field where she could help improve websites and apps and things like that.

ARMITAGE: I was getting really excited about it and thinking, you know, my experience was relevant. That was the pivot that I was trying to make.

WOODS: In her nights and weekends, Jill studied for a certificate for this new job in tech. And while still working at the nonprofit, Jill soon realized that applying for new jobs was a full-time job in itself.

ARMITAGE: Finally, I just realized, I have to just cut the cord. I'm not finding the time to do this job search, so I did leave my job voluntarily.

VANEK SMITH: Jill has been networking really hard, taking on voluntary gigs and applying to tons of jobs but still nothing.

ARMITAGE: I don't know where that needle in the haystack is. I really - I'm at a loss.

WOODS: And, yes, Jill might be able to find a part-time job at a restaurant or a warehouse, but she is worried about how that might affect her Medicaid eligibility. And plus, it always just seemed like that tech job with great pay might be just around the corner if she just keeps focusing on that one goal.

VANEK SMITH: And Jill says she's found entire communities of people in the same situation as she's in.

ARMITAGE: I see so many people online that are totally hirable, and there was a lot of, you know, still, I have a lot of shame and guilt. Why can't I figure this out? But it's nice to know we're not alone.

VANEK SMITH: Jill is in a really hard situation. Still, according to the Congressional Budget Office, the U.S. has already reached full employment, at least according to their one measure. That's estimated at about 4.5% - a little higher than the rate we have now.

WOODS: So it seemed like this real puzzle reconciling the stories of unemployed people like Jill with the concept of full employment that some people say we've reached. A lot of employers are saying there's a labor shortage, but is this as good as the economy will ever be? We have plenty of motivated, skilled people saying that they are struggling to find work.

VANEK SMITH: So we called up Tara Sinclair, an economics professor at George Washington University. And Tara explains that full employment does not mean an unemployment rate of zero, and that is for two reasons. The first is something economists call frictional unemployment.

TARA SINCLAIR: Which is people changing jobs and being unemployed between jobs, but it's while they're looking for another job. And so there's always going to be people that have perhaps just a brief gap between employment spells.

VANEK SMITH: Even if the economy is going super well, you still might expect some people would be unemployed for maybe a few weeks as they look around for the right job, like people switching employers or students who've just graduated. And Tara says there is a second reason why full employment might not be zero.

SINCLAIR: There's also structural unemployment, where people may not have the right background, education, skills to qualify for the jobs in their area. And so there may be what people often call a mismatch between what the job seekers are looking for and what employers are looking for - you know, a square-peg-round-hole job search.

WOODS: So this mismatch, structural unemployment, isn't caused by recessions or economic busts. It's caused by something else. Like, with a big shift to online shopping, there might be less need for people with in-person retail experience and more need for delivery people. Like, there were about 11 million job openings in November, and employers are just really trying to find the right person for the right job. And from the workers' point of view, a lot of these employers are not necessarily offering what they want. And all of this, this mismatch - that is structural unemployment. And we're seeing a lot of that now in the pandemic economy.

VANEK SMITH: So there is full employment, when everyone who wants to work is working. And the main exceptions are people who, you know, are just temporarily between jobs, or they're taking a minute to think about what they want to do or maybe the skills they have are just not a good match for the jobs that are open. And so where does Jill, our tech job seeker, fit into all of this? It can be hard to tell. In a weak economy, employers will be less willing to take on people with less work experience in the field, like Jill. On the other hand, we could be looking at structural unemployment, so there might just be less of a need for Jill's skills doing things like helping improve websites and apps.

WOODS: And that illustrates the complexity of this concept of full employment. Like, it is really hard to estimate. And that's what we found when we asked Tara whether or not she thought we were at full employment now.

SINCLAIR: Yeah. Well, on the one hand, 4% sounds historically low. But on the other hand, we were at 3.5 pre-pandemic. It could definitely go a bit lower.

VANEK SMITH: Think back to January 2020. The economy was doing pretty well. Price inflation was under control, and unemployment was low at 3.5%. Also, unemployment isn't the only indicator to consider.

SINCLAIR: We look at employment numbers, and they're still well below where we were pre-pandemic - about 4 million below. And so there's this other piece of the puzzle, which is, what's happening with people who are not working right now but aren't being counted as unemployed because they are not looking for a job at all?

WOODS: The numbers today show we have just a 60% employment rate, which could go higher. By contrast, the unemployment rate doesn't count people who have retired or are staying home to care for family members or who have given up entirely on finding a job. Also, unemployment is consistently higher for some races and ethnicities. So for example, the Black unemployment rate is just over 7%. And Tara's view is we could still get way more people working.

SINCLAIR: I do think that there is a strong debate at the moment amongst economists. But, you know, I think most of the economists that are looking at the labor market, that's really - that's their focus. Still, we see room for continued expansion in employment.

VANEK SMITH: For her part, Jill isn't banking on improving economic conditions. She's given herself a deadline for this career shift - the end of February.


WOODS: Today's show was produced by Jamila Huxtable with help from James Willetts. It was fact-checked by Taylor Washington. Viet Le is our senior producer. Kate Concannon edits the show, and THE INDICATOR is a production of NPR.


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