What does real employment refer to?

Real employment refers to the concept of employment levels that account for various types of unemployment, particularly the absence of cyclical unemployment. Cyclical unemployment occurs as a result of economic downturns or fluctuations in the business cycle, meaning that during periods of recession, more workers may lose their jobs.

When discussing real employment, the focus is on the idea that the economy is functioning at a level where jobs are filled based on the fundamental structure of the economy rather than being significantly affected by these cyclical fluctuations. This means that the employment being referred to is stable and indicative of a healthy economy, where workers can find jobs that correspond to their skills and the demand for labor remains steady.

This understanding is essential in macroeconomics as it helps to assess the overall health and efficiency of the labor market, making it clear why the focus on employment without cyclical unemployment is the correct viewpoint in this context.