The figure shows the percent of time that the unemployment rate was “too high,” meaning that it was above the rate economists (and, importantly, the Fed) associate with full employment. In the postwar decades, job markets were slack less than a third of the time. Since then, they’ve been slack about two-thirds of the time, even if you leave out the great recession. While there’s a lot that goes into rising income inequality, it is not a coincidence that low, middle, and high incomes grew together in periods when tight labor markets dominated, and vice versa.
- Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities and author of 'Getting Back to Full Employment'.