What to Watch on Jobs Day: Will we finally reach full employment in 2016?

We’ve seen solid growth in employment over the past couple of years, and the unemployment rate has come down dramatically, but by any reasonable definition we are still not that close to genuine full employment. So, what is full employment? In a great book (pdf), Jared Bernstein and Dean Baker define full employment as “the level of employment at which additional demand [injected into] the economy will not create more employment.” Full employment should show up in indicators on both the quantity and the price side (i.e., wages) of the labor market. Unemployment is low during periods of full employment, and due to high demand for labor, employed workers have more bargaining power—as a result they will be better able to negotiate higher wages and get the hours they want.

Let’s look at some measures of employment on the quantity side. A good measure of slack in employment and hours is the BLS’s U6 measure of labor underutilization. It measures total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force. Basically, people who want to work, plus employed people who want to work more hours, plus people who have looked for work in the last year but stopped looking for some reason in the last four weeks and are hence not classified as currently “in the labor force.”

The figure below shows these data by race, which demonstrates that, as with the unemployment rate, the underemployment rate is much higher for people of color. While the U6 has come down substantially but it is still elevated and has a ways to go before it gets to pre-recession levels. (And these pre-recession levels are elevated relative to the last time we had unambiguous full employment in the late 1990s and 2000.)

Jobs

All races hurt by recession, racial and ethnic disparities persist: Underemployment rate of workers age 16 and older by race, 2000–2016

Date White Black Hispanic
2000-01-01 5.6% 12.8% 10.2%
2000-02-01 5.5% 12.6% 10.2%
2000-03-01 5.7% 12.4% 10.6%
2000-04-01 5.6% 12.3% 9.5%
2000-05-01 5.7% 12.8% 10.2%
2000-06-01 5.7% 12.6% 10.0%
2000-07-01 5.7% 12.5% 10.6%
2000-08-01 5.8% 12.6% 10.1%
2000-09-01 5.5% 12.0% 10.7%
2000-10-01 5.4% 11.8% 9.8%
2000-11-01 5.6% 12.2% 10.8%
2000-12-01 5.6% 11.8% 10.6%
2001-01-01 5.8% 13.1% 10.6%
2001-02-01 5.9% 12.3% 11.3%
2001-03-01 5.9% 13.1% 10.7%
2001-04-01 5.9% 12.8% 11.4%
2001-05-01 6.0% 13.0% 11.4%
2001-06-01 6.3% 13.0% 12.4%
2001-07-01 6.4% 12.9% 12.0%
2001-08-01 6.7% 13.9% 11.3%
2001-09-01 7.0% 14.3% 13.0%
2001-10-01 7.4% 15.0% 13.4%
2001-11-01 7.6% 15.3% 13.7%
2001-12-01 7.9% 15.5% 13.9%
2002-01-01 7.6% 15.4% 14.0%
2002-02-01 7.7% 15.5% 13.7%
2002-03-01 7.8% 15.5% 14.1%
2002-04-01 7.9% 16.1% 13.5%
2002-05-01 8.0% 15.2% 13.2%
2002-06-01 7.9% 15.3% 13.1%
2002-07-01 8.0% 15.2% 13.4%
2002-08-01 8.0% 16.4% 13.5%
2002-09-01 8.0% 15.4% 13.2%
2002-10-01 7.9% 15.3% 13.8%
2002-11-01 8.0% 16.2% 13.6%
2002-12-01 8.0% 16.2% 14.1%
2003-01-01 8.1% 16.0% 14.3%
2003-02-01 8.2% 16.3% 14.6%
2003-03-01 8.2% 15.8% 14.2%
2003-04-01 8.5% 16.0% 13.9%
2003-05-01 8.3% 16.5% 15.0%
2003-06-01 8.2% 17.0% 15.2%
2003-07-01 8.4% 16.8% 14.5%
2003-08-01 8.4% 16.4% 14.2%
2003-09-01 8.4% 16.9% 14.1%
2003-10-01 8.2% 16.7% 14.0%
2003-11-01 8.2% 16.0% 14.1%
2003-12-01 8.1% 15.7% 13.6%
2004-01-01 8.1% 15.6% 14.2%
2004-02-01 7.6% 15.7% 13.4%
2004-03-01 8.1% 17.0% 14.0%
2004-04-01 8.1% 16.0% 13.5%
2004-05-01 8.0% 16.0% 13.4%
2004-06-01 7.9% 15.7% 12.7%
2004-07-01 7.7% 16.8% 12.9%
2004-08-01 7.7% 16.3% 12.8%
2004-09-01 7.6% 16.4% 12.6%
2004-10-01 7.8% 16.9% 13.2%
2004-11-01 7.5% 16.5% 12.7%
2004-12-01 7.6% 16.6% 12.3%
2005-01-01 7.5% 16.8% 11.8%
2005-02-01 7.6% 16.4% 11.9%
2005-03-01 7.6% 16.4% 11.9%
2005-04-01 7.3% 16.4% 11.5%
2005-05-01 7.3% 15.9% 11.5%
2005-06-01 7.3% 16.1% 11.3%
2005-07-01 7.1% 15.7% 11.6%
2005-08-01 7.1% 15.6% 11.8%
2005-09-01 7.5% 15.1% 12.3%
2005-10-01 7.2% 14.8% 11.6%
2005-11-01 7.0% 16.3% 11.5%
2005-12-01 7.1% 15.0% 11.3%
2006-01-01 6.9% 14.1% 10.8%
2006-02-01 7.0% 14.8% 10.7%
2006-03-01 6.9% 14.6% 9.9%
2006-04-01 6.6% 14.8% 10.6%
2006-05-01 6.9% 14.0% 10.0%
2006-06-01 7.1% 14.7% 10.5%
2006-07-01 7.1% 14.9% 10.6%
2006-08-01 7.0% 14.8% 10.5%
2006-09-01 6.6% 14.3% 10.5%
2006-10-01 6.9% 14.1% 10.3%
2006-11-01 6.8% 13.6% 10.3%
2006-12-01 6.8% 13.3% 10.2%
2007-01-01 6.8% 13.4% 11.0%
2007-02-01 6.8% 13.4% 10.9%
2007-03-01 6.7% 13.3% 10.5%
2007-04-01 6.8% 13.3% 11.2%
2007-05-01 6.8% 13.4% 11.0%
2007-06-01 6.9% 13.5% 11.1%
2007-07-01 7.0% 13.0% 10.9%
2007-08-01 7.2% 12.8% 11.2%
2007-09-01 7.2% 13.3% 11.2%
2007-10-01 7.1% 13.4% 11.1%
2007-11-01 7.1% 14.5% 11.1%
2007-12-01 7.3% 14.4% 12.5%
2008-01-01 7.2% 14.7% 13.0%
2008-02-01 7.2% 14.1% 12.1%
2008-03-01 7.4% 14.7% 12.8%
2008-04-01 7.6% 14.3% 12.9%
2008-05-01 8.0% 15.0% 14.1%
2008-06-01 8.2% 15.2% 14.6%
2008-07-01 8.7% 15.8% 15.1%
2008-08-01 9.0% 16.6% 15.7%
2008-09-01 9.3% 17.5% 16.1%
2008-10-01 10.0% 18.3% 17.7%
2008-11-01 10.8% 18.5% 18.5%
2008-12-01 11.5% 20.1% 19.8%
2009-01-01 11.7% 19.6% 20.3%
2009-02-01 12.4% 21.1% 22.4%
2009-03-01 13.0% 21.5% 23.4%
2009-04-01 13.5% 22.8% 22.6%
2009-05-01 13.8% 23.7% 24.7%
2009-06-01 13.6% 22.5% 23.9%
2009-07-01 13.7% 23.1% 23.2%
2009-08-01 14.1% 23.6% 24.6%
2009-09-01 14.2% 23.8% 25.1%
2009-10-01 15.0% 24.0% 25.9%
2009-11-01 14.6% 24.3% 25.1%
2009-12-01 14.5% 25.0% 25.0%
2010-01-01 13.6% 24.2% 23.6%
2010-02-01 14.2% 24.4% 23.5%
2010-03-01 14.1% 24.4% 24.1%
2010-04-01 14.6% 25.0% 23.9%
2010-05-01 14.2% 23.6% 23.5%
2010-06-01 13.8% 23.5% 23.2%
2010-07-01 13.7% 24.5% 23.0%
2010-08-01 13.8% 24.8% 23.6%
2010-09-01 14.5% 25.2% 23.7%
2010-10-01 14.5% 24.5% 23.9%
2010-11-01 13.8% 25.3% 24.9%
2010-12-01 13.8% 25.0% 24.3%
2011-01-01 13.2% 24.6% 22.5%
2011-02-01 14.1% 24.4% 23.9%
2011-03-01 13.6% 23.5% 22.7%
2011-04-01 13.4% 25.0% 22.4%
2011-05-01 13.0% 25.0% 22.7%
2011-06-01 13.2% 25.6% 22.4%
2011-07-01 13.2% 25.3% 22.0%
2011-08-01 13.3% 26.2% 21.8%
2011-09-01 13.6% 25.9% 22.5%
2011-10-01 13.1% 24.5% 24.3%
2011-11-01 12.5% 24.4% 22.3%
2011-12-01 12.4% 24.0% 21.2%
2012-01-01 12.3% 23.2% 21.0%
2012-02-01 11.9% 22.9% 19.5%
2012-03-01 11.9% 22.5% 19.6%
2012-04-01 12.0% 21.7% 20.5%
2012-05-01 12.1% 22.8% 20.9%
2012-06-01 12.1% 22.4% 21.0%
2012-07-01 12.4% 22.5% 20.1%
2012-08-01 12.3% 22.7% 19.6%
2012-09-01 12.4% 22.8% 19.6%
2012-10-01 12.0% 23.0% 19.0%
2012-11-01 11.8% 22.0% 19.6%
2012-12-01 11.9% 22.7% 18.8%
2013-01-01 11.8% 22.8% 19.1%
2013-02-01 11.7% 22.7% 19.7%
2013-03-01 11.6% 22.4% 18.7%
2013-04-01 11.5% 22.2% 18.4%
2013-05-01 11.7% 22.5% 18.0%
2013-06-01 11.8% 22.7% 18.2%
2013-07-01 11.3% 22.3% 18.0%
2013-08-01 11.0% 21.5% 18.5%
2013-09-01 11.1% 21.1% 17.9%
2013-10-01 11.1% 21.6% 18.3%
2013-11-01 10.9% 20.8% 17.2%
2013-12-01 10.6% 20.8% 18.0%
2014-01-01 10.2% 20.5% 17.1%
2014-02-01 10.3% 20.1% 16.8%
2014-03-01 10.2% 20.4% 16.6%
2014-04-01 9.9% 20.4% 16.2%
2014-05-01 9.9% 19.7% 16.1%
2014-06-01 9.4% 18.5% 16.3%
2014-07-01 9.8% 19.4% 16.2%
2014-08-01 9.8% 19.4% 15.6%
2014-09-01 9.5% 19.1% 14.5%
2014-10-01 9.3% 19.5% 14.7%
2014-11-01 9.2% 19.0% 14.6%
2014-12-01 9.0% 17.9% 14.9%
2015-01-01 9.1% 16.8% 15.0%
2015-02-01 8.9% 18.5% 14.2%
2015-03-01 8.8% 17.5% 14.8%
2015-04-01 8.7% 17.5% 14.4%
2015-05-01 8.7% 17.5% 14.5%
2015-06-01 8.4% 16.8% 14.3%
2015-07-01 8.3% 16.5% 13.9%
2015-08-01 8.1% 17.0% 13.7%
2015-09-01 7.9% 16.3% 13.5%
2015-10-01 7.9% 15.7% 13.2%
2015-11-01 8.0% 16.0% 13.1%
2015-12-01 8.2% 15.4% 12.7%
2016-01-01 8.2% 15.6% 12.5%
2016-02-01 7.8% 15.9% 11.4%
2016-03-01 8.1% 16.8% 11.8%
2016-04-01 8.0% 15.6% 11.7%
2016-05-01 7.8% 15.9% 12.9%
ChartData Download data

The data below can be saved or copied directly into Excel.

Note: Shaded areas denote recessions. Underemployment is measured to correspond to the Bureau of Labor Statistics' U-6 measure as "total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force."  Underemployment is seasonally adjusted.

Source: EPI analysis of Bureau of Labor Statistics basic monthly Current Population Survey microdata

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Further, no group has come through the recession unscathed. While workers with lower levels of education have higher levels of underemployment, those with higher levels of education still have elevated levels, as well. You’ll see the same thing in the depressed prime-age employment-to-population (EPOP) ratio. I talk about EPOP a lot, but to be clear, it’s not an isolated measure. You also see slack in the sheer number of missing workers who have left or never entered the labor market because of weak job opportunities. And the depressed quits rate, which indicates that workers are stuck in jobs that they would leave if they could.

Meanwhile, on the price side of the labor market (wages), the evidence that we’re far from full employment is clear—nominal wage growth has barely picked up its pace of growth at all since the recovery began (see details here and here). If employment growth continues, the labor market will eventually tighten and wage growth will accelerate. But we’re not there yet.

So, what do we do to help the economy reach full employment? We keep our foot off the brakes and we consider tapping on the gas.

Keeping our foot off the brakes refers to the Federal Reserve. When the Open Market Committee meets next week and in coming months, they should base their decisions on the data, which, so far, indicates that the economy needs more time to recover. Another short-term interest rate increase could cause the economy to slow prematurely. There has not been any threat of inflationary pressures, and there is still ample evidence of labor market slack, so the Fed should let the labor market tighten without further interference.

What about tapping the gas? Austerity at all levels of government has been a damper on economic growth. Public sector employment is still below where it was before the recession began, let alone where it should be considering a growing population over the last eight years. As shown in the chart below, we are still down 375,000 public sector jobs from the past peak, and a total of 1.8 million public sector jobs short if we add in the number of jobs that would have been created to keep up with population growth. We’ve seen this shortfall in public sector job growth across the board from the federal government on down to public school teachers at the local level. As my colleague, David Cooper, aptly pointed out last week, “states that invest in their educational systems and bolster their public sectors tend to be more productive over time and more resilient in the face of economic downturns.” In the past year, state and local spending has ticked up, moving this sector from a terrible drag on growth to a very small positive. This is a good first step, but there’s a lot of room to recover more on the public spending front.

Jobs gap

Public-sector jobs gap: Government employment and the number of jobs needed to keep up with the growth in population, 2000–2016

Date Public-sector employment Public gap December 2007 level
Jan-2000 20.571
Feb-2000 20.599
Mar-2000 20.733
Apr-2000 20.802
May-2000 21.147
Jun-2000 20.887
Jul-2000 20.867
Aug-2000 20.837
Sep-2000 20.735
Oct-2000 20.743
Nov-2000 20.76
Dec-2000 20.804
Jan-2001 20.835
Feb-2001 20.906
Mar-2001 20.945
Apr-2001 20.992
May-2001 21.029
Jun-2001 21.137
Jul-2001 21.185
Aug-2001 21.218
Sep-2001 21.242
Oct-2001 21.275
Nov-2001 21.326
Dec-2001 21.355
Jan-2002 21.377
Feb-2002 21.39
Mar-2002 21.431
Apr-2002 21.443
May-2002 21.514
Jun-2002 21.549
Jul-2002 21.544
Aug-2002 21.589
Sep-2002 21.546
Oct-2002 21.559
Nov-2002 21.581
Dec-2002 21.588
Jan-2003 21.626
Feb-2003 21.624
Mar-2003 21.61
Apr-2003 21.595
May-2003 21.567
Jun-2003 21.606
Jul-2003 21.633
Aug-2003 21.556
Sep-2003 21.504
Oct-2003 21.558
Nov-2003 21.535
Dec-2003 21.546
Jan-2004 21.538
Feb-2004 21.55
Mar-2004 21.588
Apr-2004 21.614
May-2004 21.614
Jun-2004 21.601
Jul-2004 21.606
Aug-2004 21.626
Sep-2004 21.635
Oct-2004 21.656
Nov-2004 21.692
Dec-2004 21.693
Jan-2005 21.735
Feb-2005 21.744
Mar-2005 21.74
Apr-2005 21.754
May-2005 21.781
Jun-2005 21.763
Jul-2005 21.857
Aug-2005 21.863
Sep-2005 21.845
Oct-2005 21.829
Nov-2005 21.859
Dec-2005 21.879
Jan-2006 21.847
Feb-2006 21.878
Mar-2006 21.903
Apr-2006 21.919
May-2006 21.926
Jun-2006 21.922
Jul-2006 21.973
Aug-2006 22.011
Sep-2006 22.082
Oct-2006 22.068
Nov-2006 22.083
Dec-2006 22.088
Jan-2007 22.095
Feb-2007 22.131
Mar-2007 22.149
Apr-2007 22.175
May-2007 22.193
Jun-2007 22.207
Jul-2007 22.171
Aug-2007 22.226
Sep-2007 22.279
Oct-2007 22.297
Nov-2007 22.334
Dec-2007 22.376 22.3760 22.376
Jan-2008 22.388 22.3922 22.376
Feb-2008 22.417 22.4073 22.376
Mar-2008 22.443 22.4217 22.376
Apr-2008 22.45 22.4372 22.376
May-2008 22.483 22.4524 22.376
Jun-2008 22.517 22.4696 22.376
Jul-2008 22.568 22.4875 22.376
Aug-2008 22.567 22.5057 22.376
Sep-2008 22.537 22.5252 22.376
Oct-2008 22.549 22.5433 22.376
Nov-2008 22.56 22.5604 22.376
Dec-2008 22.556 22.5765 22.376
Jan-2009 22.579 22.5915 22.376
Feb-2009 22.576 22.6058 22.376
Mar-2009 22.56 22.6195 22.376
Apr-2009 22.677 22.6342 22.376
May-2009 22.617 22.6488 22.376
Jun-2009 22.576 22.6651 22.376
Jul-2009 22.521 22.6823 22.376
Aug-2009 22.537 22.7005 22.376
Sep-2009 22.451 22.7197 22.376
Oct-2009 22.524 22.7377 22.376
Nov-2009 22.533 22.7546 22.376
Dec-2009 22.482 22.7704 22.376
Jan-2010 22.491 22.7852 22.376
Feb-2010 22.476 22.7995 22.376
Mar-2010 22.518 22.8131 22.376
Apr-2010 22.569 22.8116 22.376
May-2010 22.996 22.8252 22.376
Jun-2010 22.74 22.8390 22.376
Jul-2010 22.569 22.8540 22.376
Aug-2010 22.42 22.8704 22.376
Sep-2010 22.247 22.8873 22.376
Oct-2010 22.297 22.9045 22.376
Nov-2010 22.287 22.9197 22.376
Dec-2010 22.266 22.9341 22.376
Jan-2011 22.264 22.9481 22.376
Feb-2011 22.213 22.9600 22.376
Mar-2011 22.194 22.9720 22.376
Apr-2011 22.185 22.9853 22.376
May-2011 22.128 22.9986 22.376
Jun-2011 22.127 23.0129 22.376
Jul-2011 22.054 23.0289 22.376
Aug-2011 22.045 23.0448 22.376
Sep-2011 21.981 23.0618 22.376
Oct-2011 21.998 23.0782 22.376
Nov-2011 21.97 23.0925 22.376
Dec-2011 21.95 23.1063 22.376
Jan-2012 21.949 23.1197 22.376
Feb-2012 21.947 23.1317 22.376
Mar-2012 21.945 23.1441 22.376
Apr-2012 21.922 23.1570 22.376
May-2012 21.913 23.1696 22.376
Jun-2012 21.892 23.1840 22.376
Jul-2012 21.915 23.1988 22.376
Aug-2012 21.943 23.2153 22.376
Sep-2012 21.923 23.2327 22.376
Oct-2012 21.896 23.2489 22.376
Nov-2012 21.874 23.2644 22.376
Dec-2012 21.892 23.2785 22.376
Jan-2013 21.877 23.2910 22.376
Feb-2013 21.894 23.3015 22.376
Mar-2013 21.87 23.3128 22.376
Apr-2013 21.863 23.3252 22.376
May-2013 21.857  23.3383 22.376 
Jun-2013 21.812 23.3530 22.376
Jul-2013 21.814 23.3677 22.376
Aug-2013 21.857 23.3851 22.376
Sep-2013 21.839 23.4030 22.376
Oct-2013 21.829 23.4200 22.376
Nov-2013 21.843 23.4363 22.376
Dec-2013 21.828 23.4510 22.376
Jan-2014 21.807 23.4656 22.376
Feb-2014 21.817 23.4772 22.376
Mar-2014 21.828 23.4896 22.376
Apr-2014 21.856 23.5030 22.376
May-2014 21.854 23.5172 22.376
Jun-2014 21.893 23.5330 22.376
Jul-2014 21.881 23.5488 22.376
Aug-2014 21.868 23.5665 22.376
Sep-2014 21.917 23.5845 22.376
Oct-2014 21.927 23.6018 22.376
Nov-2014 21.934 23.6183 22.376
Dec-2014 21.947 23.6331 22.376
Jan-2015 21.954 23.6479 22.376
Feb-2015 21.967 23.6594 22.376
Mar-2015 21.961 23.6718 22.376
Apr-2015 21.971 23.6853 22.376
May-2015 21.988 23.6995 22.376
Jun-2015 21.990 23.7153 22.376
Jul-2015 22.022 23.7311 22.376
Aug-2015 22.049 23.7488 22.376
Sep-2015 22.036 23.7668 22.376
Oct-2015 22.027 23.7841 22.376
Nov-2015 22.028 23.8006 22.376
Dec-2015 22.040 23.8154 22.376
Jan-2016 22.053 23.8302 22.376
Feb-2016 22.064 23.8418 22.376
March-2016 22.083 23.8541 22.376
April-2016 22.08 23.8676 22.376
May-2016 22.105 23.8818 22.376
June-2016 22.138 23.8976 22.376
July-2016 22.176  23.9124  22.376
ChartData Download data

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Note: The spikes in public-sector employment in 2000 and 2010 are temporary workers hired to conduct the decennial Census.

Source: Public-sector employment is from the Bureau of Labor Statistics Current Employment Statistics public data series. Population data are from FRED (Federal Reserve Economic Data), "Total Population: All Ages including Armed Forces Overseas."

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  • benleet

    An article at Dollars and Sense by Gerald Friedman says that Sanders’ plan calls for spending $100 billion a year on infrastructure and $75 billion per year on universal pre-K education. Clinton’s web page (plan-raise-americas-wages) calls for $55 billion and $80 billion per year in same programs. Either plan would possibly create between 3 and 4 million jobs if the net cost per job were $40,000. Friedman has an article at Truthout, What Would Sanders Do?, that describes a rapid wage increase over 10 years, 40% of it due to his health care proposals. http://www.truth-out.org/news/item/34675-what-would-sanders-do — from this article Friedman says that the ratio of average income of the lowest 20% of households to the top 5% has increased, 1970 to 2015, from 1 to 10.9 to 1 to 23.1. This is the first article I’ve read that details the effect on wages and economic growth of any politician’s proposals. Friedman predicts that average wages would grow from $36,000 a year to $47,000 by 2024. Very optimistic, but also to be sure a very thorough article.