We’ve seen solid growth in employment over the past couple of years, and the unemployment rate has come down dramatically, but by any reasonable definition we are still not that close to genuine full employment. So, what is full employment? In a great book (pdf), Jared Bernstein and Dean Baker define full employment as “the level of employment at which additional demand [injected into] the economy will not create more employment.” Full employment should show up in indicators on both the quantity and the price side (i.e., wages) of the labor market. Unemployment is low during periods of full employment, and due to high demand for labor, employed workers have more bargaining power—as a result they will be better able to negotiate higher wages and get the hours they want.

Let’s look at some measures of employment on the quantity side. A good measure of slack in employment and hours is the BLS’s U6 measure of labor underutilization. It measures total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force. Basically, people who want to work, plus employed people who want to work more hours, plus people who have looked for work in the last year but stopped looking for some reason in the last four weeks and are hence not classified as currently “in the labor force.”

The figure below shows these data by race, which demonstrates that, as with the unemployment rate, the underemployment rate is much higher for people of color. While the U6 has come down substantially but it is still elevated and has a ways to go before it gets to pre-recession levels. (And these pre-recession levels are elevated relative to the last time we had unambiguous full employment in the late 1990s and 2000.)

Further, no group has come through the recession unscathed. While workers with lower levels of education have higher levels of underemployment, those with higher levels of education still have elevated levels, as well. You’ll see the same thing in the depressed prime-age employment-to-population (EPOP) ratio. I talk about EPOP a lot, but to be clear, it’s not an isolated measure. You also see slack in the sheer number of missing workers who have left or never entered the labor market because of weak job opportunities. And the depressed quits rate, which indicates that workers are stuck in jobs that they would leave if they could.

Meanwhile, on the price side of the labor market (wages), the evidence that we’re far from full employment is clear—nominal wage growth has barely picked up its pace of growth at all since the recovery began (see details here and here). If employment growth continues, the labor market will eventually tighten and wage growth will accelerate. But we’re not there yet.

So, what do we do to help the economy reach full employment? We keep our foot off the brakes and we consider tapping on the gas.

Keeping our foot off the brakes refers to the Federal Reserve. When the Open Market Committee meets next week and in coming months, they should base their decisions on the data, which, so far, indicates that the economy needs more time to recover. Another short-term interest rate increase could cause the economy to slow prematurely. There has not been any threat of inflationary pressures, and there is still ample evidence of labor market slack, so the Fed should let the labor market tighten without further interference.

What about tapping the gas? Austerity at all levels of government has been a damper on economic growth. Public sector employment is still below where it was before the recession began, let alone where it should be considering a growing population over the last eight years. As shown in the chart below, we are still down 375,000 public sector jobs from the past peak, and a total of 1.8 million public sector jobs short if we add in the number of jobs that would have been created to keep up with population growth. We’ve seen this shortfall in public sector job growth across the board from the federal government on down to public school teachers at the local level. As my colleague, David Cooper, aptly pointed out last week, “states that invest in their educational systems and bolster their public sectors tend to be more productive over time and more resilient in the face of economic downturns.” In the past year, state and local spending has ticked up, moving this sector from a terrible drag on growth to a very small positive. This is a good first step, but there’s a lot of room to recover more on the public spending front.