Assessing Maximum Employment

Christopher L. Foote, Shigeru Fujita, Amanda M. Michaud and Joshua Montes
Additional contact information
Christopher L. Foote: https://www.bostonfed.org/people/bank/christopher-foote.aspx
Shigeru Fujita: https://www.philadelphiafed.org/our-people/shigeru-fujita
Amanda M. Michaud: https://www.minneapolisfed.org/people/amanda-michaud

No 2025-067, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We suggest a core set of indicators for evaluating the position of the labor market relative to maximum employment. The unemployment rate remains the key indicator of the cyclical position of the labor market, as it is time-tested, is highly correlated with other indicators, and has practical measurement advantages. But other indicators can provide complementary evidence to get a fuller picture of the labor market. A joint analysis of job vacancies and unemployment in a Beveridge curve diagram is helpful when structural shocks affect the labor market and when the labor market is very tight, while the employment-to-population ratio is useful late in expansions, when increases in employment tend to arise from higher labor force participation. Additional indicators—including wage growth and worker flows—can complement the core indicators we discuss. We draw on lessons from the Global Financial Crisis and the COVID-19 pandemic to evaluate the effectiveness of various indicators.

Keywords: Maximum employment; Unemployment; Job vacancies; Labor force participation; Wages; Business cycle (search for similar items in EconPapers)
JEL-codes: E24 E32 J23 (search for similar items in EconPapers)
Pages: 28 p.
Date: 2025-08-22
New Economics Papers: this item is included in nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2025-67

DOI: 10.17016/FEDS.2025.067

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