The flexibility of labour supply 3. The effectiveness with which people are matched with job vacancies 4. Trends in wages growth. Unemployment and underemployment The conventional measure of spare capacity in the labour market is the gap between the actual unemployment rate and the unemployment rate associated with full employment.
Even at full employment, some level of unemployment is to be expected as workers leave jobs and search for new ones. As my colleague Luci Ellis discussed last week, we don't directly observe the unemployment rate associated with full employment – we need to estimate it. [1] Over recent times there has been a gradual accumulation of evidence which has led to lower estimates.