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Expand chart
Data: FacetSet; Chart: Axios Visuals

The Fed has two jobs: Keeping inflation at 2%, and ensuring full employment. But what does full employment mean? According to Minneapolis Fed president Neel Kashkari, we're clearly not there yet — despite the fact that the unemployment rate is at a 50-year low of 3.5%.

Why it matters: If we're not at full employment, and inflation remains below the 2% target rate (as it does), then the Fed has little choice but to step on the gas.

Until we see wage growth net of productivity climbing at above 2%, then we're not really at maximum employment.
— Minneapolis Federal Reserve Bank president Neel Kashkari, in an interview with Axios

By the numbers: Hourly wages were $27.91 in June, up 3.2% from a year previously. (They've since decelerated a bit, with September's data showing earnings growth of 2.9%.) Productivity, meanwhile, was growing at a 1.8% pace in June. Which means that wage growth after accounting for productivity is well below the Fed's 2% inflation target.

  • The U.S. won't be at full employment, says Kashkari, until that number rises to above 2%.

What they're saying: Kashkari tells Axios that the headline unemployment rate is "almost useless" in determining whether the U.S. economy is at full employment.

  • The unemployment rate only counts people who are actively seeking work, but most of the new jobs being created are going to people who weren't actively seeking work during the previous month — people who didn't count as unemployed.
  • So the unemployment rate doesn't give a good indication of how many more people the economy can gainfully employ.
  • Instead, Kashkari likes to look at wage growth. "We're trying to assess supply and demand in the market," he says. "The best way of assessing supply and demand in the market is to look at the price. The price of labor is wage growth. And until we see wage growth net of productivity climbing at above 2%, we're not really at maximum employment yet."

The big picture: Kashkari is a noted dove, and it's not clear that other Fed officials would agree entirely with his analysis. But it's undeniable that wage growth is low.

  • If Americans started earning more money, the Fed would likely welcome that as a sign of economic health, rather than worrying that it might start causing too much inflation.

Go deeper

Exclusive: Don Jr. tells Georgia Senate voters that Trump is on the ballot

Photo: Eva Marie Uzcategui T./Anadolu Agency/Getty Images

In a six-figure radio ad being released in Georgia today, Donald Trump Jr. tells the state's voters that the U.S. Senate — and his father's accomplishments — are on the line during January's special election, according to audio obtained by Axios.

Why it matters: Trump Jr.'s first of many advertisements in the Georgia Senate races argues the race isn't just about electing the Republican incumbents, but also about preserving President Trump's agenda.

Dion Rabouin, author of Markets
2 hours ago - Economy & Business

Everyone's bullish

Illustration: Sarah Grillo/Axios

Following positive vaccine news and the run-up in global equities punctuated last week by the Dow hitting 30,000 points, investors are again throwing caution to the wind and growing more uniform in their bets that stocks will continue to rise.

Between the lines: The resurgence of traders' risk appetite has some urging caution, as unanimity in either excitement or fear historically has proven to be a contrarian signal for the stock market.

Salesforce rolls the dice on Slack

Illustration: Sarah Grillo/Axios

Salesforce's likely acquisition of workplace messaging service Slack — not yet a done deal but widely anticipated to be announced Tuesday afternoon — represents a big gamble for everyone involved.

For Slack, challenged by competition from Microsoft, the bet is that a deeper-pocketed owner like Salesforce, with wide experience selling into large companies, will help the bottom line.