Federal Reserve sees economy near full employment as jobless rate dips to 4%

The US unemployment rate slipped to 4.1% in July, continuing a quiet descent from 4.5% in November 2025. Federal Reserve Chair Kevin Warsh and his colleagues see an economy approaching full employment. By the Fed’s own June projections, the median unemployment estimate for 2026 was 4.3%, with a longer-run estimate of 4.2%. The actual rate is already beating both benchmarks. The gap between headline and reality The number of unemployed Americans fell by 178,000 in July, bringing the total to 6.916 million. The not-so-good news: nonfarm payrolls actually contracted by 23,000 in the same month. Previous months got revised lower too, with June dropping to just 20,000 new jobs and May revised down to 63,000. When the unemployment rate falls but payrolls shrink, something else is doing the work. In this case, it’s people leaving the labor force entirely. The labor force participation rate fell to 61.4% in July, its lowest level since early 2021. The employment-population ratio sits at 58.9%. The U-6 rate, the broader measure that includes people marginally attached to the labor force and those working part-time for economic reasons, held flat at 7.9%. That’s nearly double the official ra...