What is full employment today?

Everyone longs for the day when the unemployment rate was only 5 percent, as it was before the recession. But can we ever get back to that level? N.C. State University economist Mike Walden responds:

“Well, we did have a much lower unemployment rate … in the 1990s, and I think effectively what you are asking is if we had full employment, what would be the unemployment rate associated with that? That is, if everyone who had the skills that companies need were hired by companies what would we get the unemployment rate down to?

“And there is some evidence and research that suggests today that if that were to happen — if we could put everyone to work who could work and find jobs because they have the right skills — we wouldn’t get the unemployment rate down to 5 percent because we have what economists call structural unemployment: We have a large number of people who are unemployed not because there potentially aren’t jobs but because they just don’t have the skills that the new economy needs.

“So there are economists who have tried to figure out if the economy improved and we were clicking on all cylinders effectively, what is the lowest unemployment rate we could get right now today — and they argue it is not 5 percent. They think it is higher — [that] somewhere between 6 and 6.5 percent is as low as we could go.

And we are not talking about tomorrow, we are talking several years out. And of course what this indicates is that we’ve got an issue. One of the issues we have in the country is making sure we have people trained and get the right skills in them for the jobs that are going to be available.”