Lowering the Bar

unemployment_limbo_9-8-14-2

When they can't meet established performance standards, the left makes up excuses, lowers the standards, and, if necessary, revises history along the way.

In economics, there's hardly a better of example of this kind of deliberate responsibility avoidance than what has happened to the idea of "full employment."

Full employment is supposed to occur when "all ... who want to work and are allowed to work are able to find employment."

The unemployment rate associated with full employment obviously can't be zero, because there will always be people out of work who are voluntarily or involuntarily moving from one job to another.

What unemployment rate represents full employment? The architects of the Humphrey–Hawkins Full Employment Act of 1978 thought it should be 4 percent for Americans age 16 and over. That benchmark is what Richard Nixon used when presenting "full employment" budgets during much of his time in office. Yes, it was a gimmicky maneuver designed to make what were then seen as horrific deficits seem more palatable; but the rate did represent the predominant economic thinking at the time. While we're in the neighborhood, I should note that the deficits incurred during the early 1970s, considered awful at the time, were chump change, even after accounting for inflation, compared to the $1 trillion-plus annual shortfalls seen during most of Barack Obama's presidency.

Forty years later, communications have improved tremendously. Unfilled job listings are available within seconds at any number of web sites attempting to match employees with employers. Applicants send resumes online instead of through the mail. One would therefore expect that the full-employment unemployment rate would have fallen, or at the very least remained the same.

Thus, I was initially quite relieved on September 4 when I sat in on the ADP Employment Report conference call. Moody's economist Mark Zandi, the report's overseer, told his audience that he expects that the economy will continue to generate 200,000 or more private-sector jobs each month as far as the eye can see, and that this serendipitous consistency will bring the U.S. economy to full employment by the end of 2016.

He further clarified his prediction by optimistically forecasting that most of today's workforce dropouts will get back into the game during that time, and that most of those who are currently working part-time but would prefer full-time jobs will find them. Those two assumptions were a bit hard to take, but it's his conference call, and he can predict what he wants. (The next day's employment report from the government, which showed only a 142,000 pickup in seasonally adjusted jobs, threw cold water on Zandi's sunny optimism. He didn't handle it well.)

But Zandi then noted that all of this would return us to full employment for the first time "in a decade." That seemed odd, as we'll explore right after the page break.