Economists declare: 'Full employment!'

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In a note following February's jobs report, economists at BNP Paribas declared that the US economy has reached full employment.

Full employment is the level of unemployment at which economists consider there to be no "deficient-demand" unemployment, meaning that the unemployment rate is as low as the economy can tolerate.

Nonfarm payrolls grew by 257,000 and the unemployment rate fell to 5.5% from 5.7% previously in February.

In its note, BNP writes, "The current unemployment rate (5.5%) has now breached the upper bound of the FOMC's latest central tendency for the long-term unemployment rate (or non-accelerating inflation rate of unemployment) of 5.2-5.5%. This is a significant move that will put pressure on the Committee to lay the groundwork for higher rates soon."

In late February, we noted that Pennsylvania Senator Pat Toomey had the most interesting observation during Fed Chair Janet Yellen's testimony on Capitol Hill that wage increases at Wal-Mart could indicate that we are approaching Nairu.

And now, with the unemployment rate falling to 5.5%, economists declare: here we are.

Ian Shepherdson at Pantheon Macro added that, "the unemployment rate has dropped into the Fed's Nairu range, 5.2-to-5.5%, for the first time since the crash. Remember, monetary policy is meant to be neutral at the Nairu; clearly, it's not."

The Fed is set to meet later this month, and while expectations are that the Fed will keep interest rates pegged near zero, the question now is how much groundwork the Fed will lay for a potential rate hike in coming meetings.

So, June it is?