Full employment is a key macroeconomic goal that economists strive to achieve. It signifies a healthy economy and stable growth. But when does an economy reach full employment? The answer can vary depending on the country’s economic policies and market conditions.

Achieving full employment involves ensuring that everyone who wants a job can find one. This means reducing structural unemployment (a mismatch between jobs that need to be filled and the skills of job-seekers) and frictional unemployment (people between jobs). It also requires keeping productivity high, which can be difficult in the presence of labour shortages.

When an economy is at full employment, it can produce as much as it needs without increasing inflation. This is because it is Pareto efficient, meaning that the economy can’t increase output without increasing the level of inputs such as labor.

Some economists define full employment as the rate of unemployment that does not cause accelerating inflation, known as NAIRU. However, this view tends to neglect the fact that inflation will continue to rise if unemployment remains lower than the NAIRU for long.

Understanding the concept of full employment can help us understand how to develop a country’s economic policies and create a conducive environment for growth. In addition to effective economic policies, the attainment of full employment also requires competent management of resources such as public finances and monetary policy. Moreover, the economic environment has a considerable influence on the employment rate, with factors such as general market and business trends playing significant roles in determining the level of unemployment in an economy.