September 8, 2015
With the unemployment rate falling to 5.1 percent in August, there will be speculation as to whether the labor market is nearing full employment. While the unemployment rate has dropped substantially from the 10.0 percent rate from October 2009, involuntary part-time employment remains high. The graph below shows the following three measures: the unemployment rate, a measure of “partial unemployment” for involuntary part-time workers, and a measure which combines the official unemployment rate and the unemployment rate equivalent to the unworked hours of involuntary part-time workers. Because involuntary part-time employment has come down more slowly than the unemployment rate, August’s 5.1 percent unemployment rate understates the level of slack in the labor market.