Overview

The unemployment rate has diverged significantly from the FOMC’s estimate of full employment since mid-2008 and, with the slow ongoing U.S. recovery, the unemployment rate is likely to continue to be elevated for an extended period of time before the Federal Reserve achieves its mandated objective of full employment. The long duration of the current period of high unemployment raises questions about the role that employment plays in guiding monetary policy, as well as concerns about the long-run effects when the economy is away from full employment for extended time periods.  This conference revisits the role that a full employment mandate should play in guiding monetary policy and examines the associated macroeconomic outcomes. How much weight should central bankers place on employment? How useful are estimates of full employment for the conduct of monetary policy? Have these estimates changed recently, and if so, why? Is wage growth a good signal for assessing the location of full employment?  Do large business cycle fluctuations have long-term implications for full employment and, thus, the value of the long-run goal itself?  Do large business cycle fluctuations affect other labor market outcomes?