Why Not Target a 3% Unemployment Rate?

When will the job market revive and get back to something close to normal? Not any time soon. The consensus expectation for April’s job report is for nonfarm payrolls to rise by 140,000 and the unemployment rate to remain at 7.6 percent, according to a Bloomberg News survey. A safe bet is that the unemployment rate won’t breach 6.5 percent, one signal for it to start tightening monetary policy, until 2014, if not later.

Sad to say, the Fed considers 5.2 percent to 6 percent the economy’s long-run normal rate of unemployment. Achieving that rate would be a vast improvement over today. Still, once upon a time and not all that long ago, America’s elites strived for full employment, a catchphrase now relegated to economic history.