Full Employment
Plain definition
Full employment is the economic condition in which everyone who wants a job at prevailing wages can find one, except for the normal churn of frictional and structural unemployment. It means zero cyclical unemployment — the economy is producing at its potential output.
In economics
Full employment is one half of the typical central-bank dual mandate (with price stability). It does not mean 0% unemployment — that is impossible and undesirable, since job-switching is healthy. When actual output equals potential GDP and unemployment equals its natural rate, the economy is at full employment; pushing beyond it through excess stimulus tends to generate inflation rather than lasting gains.
Example
If the natural rate is 4% and the actual unemployment rate falls to 4%, economists consider the economy at full employment — the remaining 4% are between jobs or facing skill mismatches, not victims of weak demand. If unemployment fell to 3% through aggressive stimulus, inflation would likely accelerate instead of employment rising sustainably.
Full employment is often taken to mean literally everyone has a job. It does not: frictional unemployment (people between jobs) and structural unemployment (skill mismatches) always remain. Full employment means no cyclical unemployment — the economy is at potential GDP — not that joblessness has vanished.