Kashkari Says Jobs Data Are Sign U.S. Not at Full Employment Yet

(Bloomberg) -- Neel Kashkari is questioning whether the economy is really at full employment, a line his Federal Reserve colleagues frequently trot out.

“We were at maximum employment. We are now at maximumer employment,” the Minneapolis Fed president tweeted Friday, after the Labor Department’s monthly employment report showed that the U.S. economy added 313,000 jobs in February.

Some on Twitter were confused. Kashkari clarified.

“I thought the ‘tongue-in-cheekiness’ of my tweet would be obvious,” Kashkari wrote. “Allow me to translate: We keep saying we are at max employment and then all these people choose to work. It suggests we weren’t really at max employment.”

Kashkari Says Jobs Data Are Sign U.S. Not at Full Employment Yet

Kashkari is touching on what could be a hot debate in coming months. U.S. unemployment at 4.1 percent is the lowest since 2000. Fed officials regularly say that they’ve essentially fulfilled the maximum employment part of their dual mandate, even as they lag when it comes to lifting inflation to their 2 percent goal.

But there are a few reasons to think there might be room to recover more workers, as Kashkari points out. Most obviously, job gains have failed to slow much, and you would expect them to in an economy at full employment. Friday’s report underlined that point.

Beyond that, the participation rate rose in February and has been relatively stable for several years. Demographically, it should be falling, so that’s a sign that workers are coming in from off the sidelines. Finally, wages have been slow to move higher, and theory would expect them to pop up if employers were competing harder for scarce workers.

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