Central banks target the employment rate, not the unemployment rate

It is mostly thought that monetary policy is driven by the unemployment rate, that central banks target a low unemployment rate as long as there is no risk of inflation. But central banks actually want to obtain a high level of (potential) production, in order to increase the well-being of the population. This means that their real objective is not a low unemployment rate, but a high employment rate, which can be very different in the event of a change in the participation rate (the percentage of the working-age population in the labour market): if the participation rate is low, the employment rate can be low despite a low unemployment rate. Indeed, it is a high employment rate that makes it possible to reduce inequality, which has also become an objective of central banks. T o find out when monetary policy may become less expansionary after a recession , observers should therefore monitor the employment rate and not the unemployment rate.