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How to Gauge Maximum Employment

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  • Marios Karabarbounis

Abstract

Assessing the level of maximum employment is a key component of conducting monetary policy. The Federal Reserve gauges the health of the labor market based on multiple labor market indicators as well as alternative statistical models. We propose an intuitive methodology to assess if the economy is close to maximum employment based on the historical behavior of the unemployment rate at the tail end of recent expansions.

Suggested Citation

  • Marios Karabarbounis, 2025. "How to Gauge Maximum Employment," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 25(32), August.
    • Handle: RePEc:fip:fedreb:101444
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    File URL: https://www.richmondfed.org/publications/research/economic_brief/2025/eb_25-32
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