Question

Is the United States' economy currently operating at that level of gross domestic product that results in or can sustain the natural rate of unemployment (sometimes also called "Full Employment")?  And if not, why not?  That is, what is the level of our nation's current unemployment rate saying (or not saying) about the economic performance of our economy over the last few years?  Assuming that the natural rate of unemployment is 4.2%, is any part of the current U.S. unemployment rate characterized by "cyclical unemployment"?

Answer 1

As per the u3 unemployment rate, that is also the official unemployment rate, is 3.9%. According to this level of unemployment, it seems that US economy is operating at full employment. But, it is not true as u5 unemployment rate is 4.6% and u6 unemployment rate is 7.6%. Here, u5 considers discouraged workers as labour force and u6 considers those also who work on part time due to economic reasons. So, official rate (u3) does not tell the true picture. So, us economy is still below the level of natural rate of unemployment.

It shows that some part of employment is a part-time employment where people get work only for few hours in a week. It is not equal to proper unemployment.

If u6 unemployment rate is considered as true unemployment rate, then, cyclical unemployment rate = 7.6%-4.2% = 3.4%.