Final answer:
An economy operating at full employment does not employ 100 percent of workers in the labor force, as full employment usually signifies an unemployment rate of 4 percent or less.
Step-by-step explanation:
An economy operating at full employment does not employ 100 percent of workers in the labor force because absolute full employment is considered unachievable due to various factors such as job transitions and voluntary unemployment. The term full employment does not imply zero unemployment but is rather characterized by the absence of cyclical or deficient-demand unemployment, meaning that the economy is operating at its productive potential. An unemployment rate of 4 percent or less is generally acknowledged as indicative of full employment. This figure is regarded as the natural rate of unemployment, reflecting typical job turnover, and includes frictional unemployment (individuals between jobs or entering the labor market) and structural unemployment (mismatches between job seekers' skills and job requirements).
Understanding full employment entails recognizing that despite a robust labor market, there will always be a certain level of unemployment due to factors such as voluntary job change, retraining, or relocation requirements. This phenomenon is also tied to the concept of full-employment GDP or potential GDP, which refers to the maximum output an economy can sustain over the long term without leading to inflation.
The significance of maintaining full employment is that it optimizes the use of labor, which is a critical economic resource; however, the natural rate of unemployment ensures that there is room for the normal dynamics of a healthy job market. Therefore, even at full employment, a certain percentage of the workforce will be in transition or unavailable for work for a variety of valid reasons.