Full employment, Prime Minister? What exactly do you mean by that?

‘Two million jobs have been created since 2010 — but there will not be a moment of rest until we have reached our goal,’ said David Cameron in a Telegraph article a fortnight before the election: ‘Two million more jobs; or full employment in Britain.’ It was a bold statement. Indeed you might think, given unemployment at 1.84 million in the winter quarter, that the target for new jobs was actually an error on the part of who-ever drafts the Prime Minister’s prose. Either way, it drew little attention amid the smoke of battle. But now the air has cleared it merits revisiting, because it connects all the key themes (except perhaps the Scottish one — so full of perils that, like the Scottish play, it is best not named) of the coming phase of national politics: aspiration, equality, spending cuts, immigration and EU membership.

What is full employment, and is it a feasible target? When George Osborne declared it to be so in April 2014, I called him ‘cheeky’ — even though his speech was followed by yet another sharp fall in jobless numbers. Full employment does not technically mean ‘everyone in work’; more like ‘everyone in full or part-time work who wants to be and is not resting between jobs’. Back in July 1955, it meant an unemployment rate of just 1 per cent, or 216,000 jobseekers.

In today’s more flexible labour market, it is reckoned to occur somewhere between 3 and 5 per cent unemployment (we’re currently at 5.6 per cent) and is easily confused with the ‘equilibrium jobless rate’ at which labour shortages begin to fuel inflationary wage claims. The Bank of England has put that at 5.1 per cent, which was the average unemployment rate from 2001 to 2007 — though economist Michael Saunders of Citi argues, ‘The labour market has changed so much over the past ten years that the equilibrium jobless rate may well be lower now than it was then.’