Have we hit full employment?

It seems like only yesterday that rising unemployment, plummeting housing prices and massive layoffs — spurred by a global financial crisis — prompted many to wonder whether the Great Recession would transform itself into an even deeper economic meltdown.

But the economy locally and nationally never descended to the depths that many feared. Colorado’s unemployment rate peaked at 8.9 percent five years ago, in September/October 2010. The Boulder Valley and Northern Colorado hit their unemployment highs during the first quarter of that year: Boulder County, 7.4 percent, January 2010; Broomfield County, 7.8 percent, January and March 2010; Larimer County, 8.3 percent, January, 2010; and Weld County, 9.8 percent, March 2010.

The intervening years have seen the state recover, thanks to an energy boom, continued diversification of industry and net in-migration of new residents. Population fuels a myriad of industries, promoting a recovery in the housing and construction markets.

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Definitions of full employment vary, but most analysts would agree that the counties that make up the Boulder Valley and Northern Colorado have reached that milestone. The latest date from the Colorado Department of Labor and Employment reveals another drop in unemployment in Weld County, which soon might join Boulder, Broomfield and Larimer counties in the “Under 3 Percent Club.”

Weld’s unemployment fell to 3.2 percent in October, its lowest level in more than 14 years. Boulder’s rate is at 2.7 percent, Broomfield’s at 2.9 percent and Larimer’s at 2.8 percent.

Definitions of full employment — where everyone who wants to work is working — vary from economist to economist. The Federal Reserve, in fact, debates what unemployment rate the nation would have to reach to achieve full employment, with many economists saying that the old mark of 5.5 percent is too high. That’s because, as the nation overall has hit that unemployment mark, economists still haven’t recorded any significant wage inflation — a telltale sign of full employment.

Additionally, many people might be working part-time but would rather work full time, understating the unemployment rate. So the definition of full employment nationwide is almost certainly below 5 percent, perhaps significantly so.

But it’s coming at the national level. Federal Reserve chair Janet Yellen, speaking at the University of Massachusetts in Amherst in September, said, “Although other indicators suggest that the unemployment rate currently understates how much slack remains in the labor market, on balance the economy is no longer far away from full employment.”

But the Boulder Valley and Northern Colorado, at rates of 2.7 percent to 3.2 percent, likely have beaten the nation to that distinction.

Barring an economic slowdown, employers in the Boulder Valley and Northern Colorado likely will see wage pressure reminiscent of the 1990s. Anecdotally, local business leaders already complain of difficulties in filling some key positions.

The Federal Reserve is expected to begin increasing interest rates, which could slow the economy, reduce demand and put the brakes on employment growth.

In the meantime, local employers should prepare to shell out in the form of higher compensation for their workers, and for a push from some part-timers to go full-time.

Christopher Wood can be reached at 303-630-1942 or 970-232-3133 or via email at cwood@bizwestmedia.com.