Page 25 - Policy Economic Report - October 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Lessons from Economics

Full Employment

Full employment is an economic situation where all workers and laborers who want to work are
employed, making it the most efficient employment circumstance possible.

True full employment is probably unachievable because it is a situation in which anyone who is willing
and able to work can find a job, and unemployment is zero. It is a theoretical goal for economic
policymakers to aim for rather than an observed state of an economy. If there is any unemployment,
then the economy is not producing at full potential, and some improvement in economic efficiency may
be possible. However, because it may not be practically possible to eliminate all unemployment from all
sources, full employment may not actually be attainable.

Full employment is not the same as zero unemployment because there are different types of
unemployment, and some are unavoidable or even necessary for a functioning labor market.

? Frictional unemployment- At any given time, jobs are being created and destroyed as industries
evolve, and the transition from old jobs to new is not seamless. For example, frictional
unemployment occurs because workers who lose their jobs or quit typically do not accept the
first new job for which they qualify. Unless they are facing extreme pressure to replace lost
income, most people take the time to find a job that fits their skills well. Because of this lag,
some percentage of the workforce is between jobs at any given time and classified as
unemployed.

? Structural unemployment - Persistent unemployment also arises from mismatch between the
supply of workers and the demand for labor at a given wage, which is known as structural
unemployment. In a fully flexible market, wages would adjust to the point where the number of
people seeking work equaled the number of positions employers were willing to provide at that
wage. Wages can be set above this level for a variety of reasons, however, such as minimum
wage requirements or because employers choose to set higher wages in order to get better
productivity from their workers. As a result, the supply of labor can exceed the demand for it,
and structural unemployment arises.

? Cyclical unemployment- This unemployment rises when an economy is in a recession and falls
when an economy is growing. Therefore, for an economy to be at full employment, it cannot be
in a recession that is causing cyclical unemployment.

Benefits of Full Employment

Full employment can provide numerous benefits to both individuals and the overall social and
economic balance of a country. As employment increases toward full employment, benefits
include:

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