The New Normal

   A 6 percent unemployment rate now equals full employment. But that's no consolation if you're one of the 6 percent.

   Economists have long debated what is an "acceptable" unemployment rate. That is, what constitutes full employment of the workforce, considering there will always be some who are between jobs, or students who are looking for their first job, mothers (or fathers) who are returning to the workforce as their children mature, those in the military (who are not counted as part of the civilian workforce), those in prison, and others.
   Zero unemployment is not possible, since that would mean everyone would be assigned a job slot and would not be able to refuse or quit. And a high unemployment rate is a symptom of economic problems. Most would agree that 10 percent is too high, and is a clear indicator of economic recession. (During the Great Depression of the 1930s, unemployment in America was as high as 25 percent, and in some parts of the world today it's in the same range.)
   So the question remains: What is the "natural" rate of unemployment, meaning what portion of the workforce out of a job is an acceptable measure of "full employment" of those available for work and actively seeking work?
   There was a time when 7 percent was considered an acceptable indicator that full employment had been reached. Currently, the nationwide U.S. unemployment rate is just above 6 percent, roughly the same level as before the Great Recession began in 2007, according to an analysis by the Congressional Budget Office.
   In some areas, the unemployment rate is as low as 4 percent or less, but this results from a strong demand for workers in a booming industry, and that can bring high wages in the short term until the boom slows or more workers move to the region.
   It's important to remember that the unemployment rate is calculated through a telephone survey, asking 1/ who is out of work, 2/ who is available for work, and 3/ who is actively seeking work. If all of the above, that person is counted as unemployed.
   However, the labor force participation rate -- the number of workers with jobs -- is still down from before the Great Recession, "well below what the CBO estimates would be achieved if the demand for workers was currently stronger," the CBO reported, and the share of part-time workers who would rather be working full-time "is significantly higher than it was before the recession, and the rate of long-term unemployment is still about a percentage point above" the average before the recession.
   The Bureau of Labor Statistics, meanwhile, reported that companies have been hiring, adding thousands of jobs to their payrolls every month, or an estimated 1.5 million from January through July of this year.
   Is that contradictory? Not really, since the number of job-seekers may be increasing faster than the rate of new hires.
   Separately, the Federal Reserve Board, in its latest Beige Book report on the national economy, noted that economic recovery is still happening, albeit slowly. Maybe that's a good thing. Slow growth may be better than a binge-and-bust pattern.
   
   However, there's always a but. And here it comes. Banks are sitting on hoards of cash, and borrowing rates are low. But there are few takers, even at rates close to zero. Across the pond, the European Central Bank's policy of charging banks a fee to let them park their excess cash for a short time doesn't seem to be working. In effect, interest rates went below zero.
   That should be an incentive for lenders to put more money to work, by making more loans to businesses and consumers, thus stimulating the economy. The Federal Reserve and the Bank of England also have kept interest rates close to zero as part of a strategy to encourage lending.
   At the same time, low savings rates for bank customers should be an incentive for them to buy more stuff, but that's not happening either. After all, there's no point to saving if the interest rate is only 1 percent or less and prices are rising at the rate of 2 percent. That means you're losing by not spending.
   Moreover, it would seem that Americans are doing just that. The U.S. Bureau of Economic Analysis reported that despite a marginal rise in income in July, spending fell. Here are the numbers: Disposable personal income increased $17.7 billion, or 0.1 percent, while expenditure decreased by $13.6 billion, or 0.1 percent.

   So we're still waiting for the recovery party to start, as families and firms watch closely for good news. On the whole, however, this new normal may be a good way to avoid an economic hangover from too much binge spending.