With today’s Bureau of Labor Statistics (BLS) jobs report we can look at the entirety of 2018—putting the year as a whole in perspective and comparing 2018 with other years. Yesterday, I provided a fairly broad overview of the first 11 months of 2018 including context since the last business cycle peak before the Great Recession (2007) and the last time the U.S. economy was at full employment (2000).

As the recovery has strengthened we’ve seen improvements in all measures of employment, unemployment, and wage growth. These measures tell a consistent story—an economy on its way to full employment, but not there yet. Taking a data-driven approach to policymaking would mean continuing to push to reduce slack, keeping interest rates from rising further and letting the economy recover for Americans across races, ethnicities, ages, levels of educational attainment, and areas of the country.

Payroll employment growth in December was 312,000, bringing average job growth in 2018 up to 220,000. As shown in the figure below, job growth during this time period was a bit higher than in 2017. This can be attributed to the shift in federal policy from austerity to stimulus in the form of both tax cuts and a nearly $300 billion increase in government spending.

In December, the unemployment rate rose to 3.9 percent, but notably for the “right” reasons as the labor force participation rate also rose 0.2 percentage points as workers returned to the labor market in search of job opportunities. Taking 2018 as a whole, the unemployment rate averaged 3.9 percent. It’s useful to compare today’s economy back to 2000, when the unemployment rate averaged 4.0 percent, and fell below 4.0 percent for five months. With a similar unemployment rate, 2000 saw no pronounced acceleration of inflation. Inflation has only recently even brushed the Fed’s target after years of being significantly below it, and a much longer spell of being on or above the target is needed. It’s safe to say that the unemployment rate can continue to fall without risking rapidly accelerating inflation.

And, there’s evidence to suggest that the current unemployment rate is overstating strength in the labor market. At times with similarly low unemployment, other indicators were stronger than today. For instance, in 2000, when the unemployment rate averaged 4.0 percent, the prime-age employment to population ratio (EPOP) averaged 81.5 percent. In December 2018 the prime-age EPOP held steady at 79.7 percent. Taken over the year, the average prime-age EPOP in 2018 was 79.4 percent, more than 2 full percentage points lower than in 2000. Remember the prime-age EPOP includes only those 25–54 years old, removing any potential baby boomer retirement effect. The figure below shows the trends in prime-age EPOP since 1989. While there’s been clear improvement since the depths of the Great Recession and its aftermath, the current level remains below the immediate pre-recession peak and even further below the 2000 peak.

What’s clear is that despite the low unemployment rate, there are still workers sitting on the sidelines because of residual weakness in today’s economy. But, month after month, those sidelined workers are returning to the labor force. In fact, more than 7 in 10 newly employed workers are coming from out of the labor force. These workers weren’t counted among the unemployed in the previous month but are now employed. From a historical perspective these flows into employment from out of the labor force are at record highs.

It’s also important to remember that an average annual unemployment rate of 3.9 percent masks important differences by race and ethnicity. While steadily improving for all groups, the average unemployment rate for white workers was 3.5 percent in 2018, compared to significantly higher levels of unemployment for black workers (6.5 percent) and Hispanic workers (4.7 percent). (Monthly unemployment rates by race and ethnicity can be found here.) It can’t be stressed enough the importance of achieving genuine full employment to these workers.

The most prominent lingering weakness in the labor market of 2018 is below target wage growth. In December, year-over-year private-sector nominal wages grew 3.2 percent. Average wage growth between the full years 2017 and 2018 hit 2.8 percent, a solid increase over the 2.5 percent average growth exhibited between 2016 and 2017. While this is definitely an improvement, we should see wage growth above 3.5 percent and for a consistent period before the labor market can be considered at genuine full employment.

As we look to 2019, the labor market should continue on its path to full employment as long as nothing throws it off the tracks. Unfortunately, if the Federal Reserve continues raising rates, the economy may never get there.