In the world of employment data, unemployment statistics get a lot of attention. They have a huge impact on the economy as a whole and they also affect several other areas. Although a certain percentage of unemployment is the norm in every economy in the world, economic theory has a concept known as full employment. What exactly is full employment and why is it significant to economists?

Full Employment= Job Eutopia

Full employment is a theoretical scenario that occurs when the entire labor force is being used in the most efficient way possible. All of the skilled labor has a job in the field that they want to be in and all of the unskilled labor has a satisfactory job as well. It is possible for an economy to have full employment, although it’s not very easy to pull off.

See Labor Immobility and the Labor Participation Rate for some limiting factors in the pursuit of full employment.

Frictional Unemployment

Although the term “full employment” sounds like everyone is working, that isn’t necessarily the case. Even during times of full employment, there are still some workers who are not working. Most of these people are considered to be in frictional unemployment. What exactly is frictional unemployment? Frictional unemployment is a term that is used to describe those who are in between jobs, but are still in the workplace. For example, if you are working in a job, and you determine that you don’t like your employer, you might decide to quit and look for a new job. During the time period where you are looking for new employment, you are considered to be in [Read more…] about What is Full Employment?