Can We Have 0% Unemployment?

Unemployment statistics on a chart

Unemployment statistics on a chart
In a newspaper ad, the Republican National Committee promised prosperity, and hinted at full employment if their candidate was elected. Their promise was, “a chicken in every pot, and a car in every garage.” But that ad wasn’t placed recently. It ran during the 1928 presidential campaign of Herbert Hoover. Hoover went on to win the election, but he wasn’t able to deliver on the RNC’s promise, because one year later the stock market crashed, triggering the Great Depression.

It took some doing, but Franklin D. Roosevelt, who succeeded Hoover, brought us back from the brink by initiating various federal programs that created jobs and a social safety net. But World War II strained our resources and, following the euphoria of Victory in Europe Day, many economists and politicians feared another depression was imminent. That’s when Congress passed the Employment Act of 1946 which put the federal government in charge of coordinating plans and resources that would “afford useful employment for those able, willing, and seeking to work, and to promote maximum employment.”

Some in Congress opposed the Act because they believed that “full employment” should be the goal, not “maximum employment.” Unfortunately, neither phrase was backed up by specific numbers. That came later. In 1978, the law was amended and re-named the Humphrey-Hawkins Act, which established 3% as the targeted goal for our rate of unemployment.

Late last week the Cooper administration reported that North Carolina ended 2017 with an unemployment rate of 4.5%. A few days later we learned that the rate of unemployment nationwide is 4.1%. By Humphrey-Hawkins standards that’s not too good, but today, Congress is OK with 4% of Americans being out of work. That’s because Congressmen all have jobs. The question is, why can’t we have zero percent unemployment? Mike Moffatt of says that’s not possible because of three factors: Cyclical Unemployment, Frictional Unemployment, and Structural Unemployment.

An example of Cyclical Unemployment is when workers are laid off due to a recession or a slow economy. Frictional Unemployment, on the other hand, is a matter of choice. Example, a CPA decides he wants to change careers and look for a job in advertising. Except in rare instances, that CPA is going to be out of work for awhile. Then there’s Structural Unemployment which occurs when there’s an absence of demand for the workers that are available. An example of that happened when Dell located in Forsyth County to make desktop computers, then shut down a year later because consumers were mainly buying laptops.

In short, those three types of unemployment keep our overall jobless rate in flux, or as explains, zero unemployment is “not possible in a market economy where, at any given point, someone is switching jobs, looking for a job, or is otherwise without a job.” That brings us back to what actually constitutes an acceptable or normal rate of unemployment, and right now, government officials seem to think that “full employment” is achieved when only 4% of the population is out of work.

Perhaps zero percent unemployment is unattainable, but why should we be satisfied with 4%? And why shouldn’t the jobless rate be the same for everyone? As it stands now, unemployment among African Americans is 7.9%, for Hispanics it’s almost 9%, and for teens it’s 15%. If Trump can really bring back the hundreds of thousands of jobs that went overseas due to more favorable tax climates, and if Congress can ever agree on a comprehensive infrastructure program that would put millions of people to work, then we might be able to move the unemployment needle downward for everyone.

In 1928 we were promised a chicken in every pot. Ninety years later, millions of Americans are still waiting for that promise to be fulfilled. This is an election year, so if Congress refuses to deliver on that promise, then they should be forewarned: On election day, the chickens may not be in our pots yet, but they sure as hell are coming home to roost.


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