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Comment by IncRnd | Hacker News Reader

> ...and that the primary risk once the economy reaches full employment is inflation, which seems to be precisely what has happened, no?

Certainly, there is inflation. There isn't full employment.

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Unemployment < 4% is basically full employment. People that are changing jobs are temporarily unemployed. Another metric you can use to reach the same conclusion is that # of job openings > unemployed work force

That's U-3. U-6 is at 7.2%. In general the claim that many people are not returning to work after COVID lockdowns is true. The reasons are up for debate, but that's not the point. The U-3 rate is an artificial rate to claim as the truth. That's moving the goal posts in order to get the win.

Plus there are a record number of unfilled job openings.

Your argument is a non sequitur to me:

> Plus there are a record number of unfilled job openings.

Yes, which would basically imply that it's incredibly easy for anyone who wants a job to get one.

> Your argument is a non sequitur to me:

For something to be a non sequitur, it must be a non sequitur to everyone, not just to one. This is not a non sequitur for two reasons.

  1) The sentence you quoted was not intended to be a
     consequence of the earlier statement.  Unemployment rate
     and number of job openings are connected, but not as you
     believe.  Correlation is not causation.  You are drawing
     inferences without cause.
  2) Full employment depends upon the number of job openings as
     well as the unemployment rate, which you ignored from
     my comment.

> Yes, which would basically imply that it's incredibly easy for anyone who wants a job to get one.

No. That is your inference but is clearly not implied.

U-6's 7.2% is compared to 7.0% in February 2020 and 8.1% in February 2007. So even that is similar to pre-Covid levels and better the the peak before the last recession.

How does that apply to full employment?

The 5% = full employment threshold has always been calculated based on U3. That's what they measured to come up with that estimate. If you want to talk about how U6 is better, then you need to compare it to previous U6 measurements, not previous U3 measurements.

If, as you were implying, U3 was hiding extra unemployment right now but U6 was more accurate, then it wouldn't be so closely tracking U3.

How is "unemployment" defined in the US? Take those numbers with a grain of salt.

In France, you were counted as "unemployed" if you were registered with the national employment agency and actively looking for employment according to their criteria.

If you didn't find anything (for example because the opportunities on offer were too far away, or various other reasonably human reasons) after a certain time, the agency dropped you, and you were no longer part of the "unemployed" statistic. Unemployment went down!

I've also seen the government there change their criteria for unemployment (for example dropping you after 9 months instead of 12), to make it seem like unemployment went down.

(I'm a big believer in statistics-driven policies, but statistics, like anything involving humans, can be corrupted)

That's very astute of you. The GP was talking about a rate called U-3, but the U-6 rate is far more descriptive. U-3 is what is generally used as the quoted rate, because it severely minimizes actual unemployment, allowing the Federal Government to use false statistics. [1]

[1] https://www.bls.gov/news.release/pdf/empsit.pdf

I'm glad someone else got on this soap box today. Folks will bend over backwards to justify the U-3 rate when it's not that meaningful at all.

It's extremely meaningful. It measures those who are unemployed. U-6 counts underemployment and people not actively searching due to an "economic reason".

Even regardless, the current U-6 rate is very close to the record low: https://fred.stlouisfed.org/series/U6RATE

The US uses a large-scale survey for unemployment rather than tying it to the unemployment process. The official definition most people quote is based on responses to the survey of "have not worked recently, have looked for work recently" but there are also broader measures of unemployment that count people who want to work even if they haven't looked, as well as people working part time who want to work full time.

Using even the broadest measure of unemployment[1], numbers are back down where they were before Covid. The labor force participation rate is still down though[2] which means that about 2% of US adults aren't looking to go back to work at all- many of them are likely now retired, students, or stay-at-home parents.

[1] https://fred.stlouisfed.org/series/U6RATE [2] https://fred.stlouisfed.org/series/CIVPART

MMTers argue that government spending at full employment will cause inflation, not that there must be full employment for there to be inflation.

Inflation has many inputs and looking at inflation strictly through a monetary lens will provide a distorted picture as to why there is inflation.

Additionally, MMT states that it needs to use taxes to manage inflation, which the US federal gov't is clearly not doing, which undermines the testability of the theory.

How do you define full employment? The unemployment rate in the USA is currently 3.8%.

There's no strict definition, but an unemployment rate <4% almost certainly corresponds to full employment, as frictional unemployment can be expected to be ~4%.

BLS defines full employment as an economy in which the unemployment rate equals the nonaccelerating inflation rate of unemployment (NAIRU), no cyclical unemployment exists, and GDP is at its potential. [1]

[1] https://www.bls.gov/opub/mlr/2017/article/full-employment-an...

> How do you define full employment? The unemployment rate in the USA is currently 3.8%.

3.8% is near historic lows.

More importantly: "full employment" doesn't mean unemployment is literally 0% - in fact, an unemployment rate of 0% would be actively bad, because it indicates that people are unable to leave their jobs (even temporarily) to seek better opportunities or life changes - usually because inflation is too high.

Aren't there record job openings?

I know "full employment" is a loaded term here, but at least in a general sense all who want a job could at least find something right?

One thing I'd be interested in seeing a discussion on as it relates to this topic is what happens when there is a legitimate labor shortage.

Not all job openings exist with the intention of ever being filled.

MMT has seemed to me to be an academic fig leaf over the indirect taxation which occurs when more money is printed. MMT is fundamentally wrong, and everyone smart knows it is, but you as an individual can't make any sort of "respected" career as an economist unless you say the right things or are stupid enough to believe them.

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