From Investopedia:
Low unemployment is usually regarded as a positive sign for the economy.
A very low rate of unemployment, however, can have negative consequences, such as inflation and reduced productivity.
When the labor market reaches a point where each additional job added does not create enough productivity to cover its cost, then an output gap, or slack, happens.
The level at which unemployment equals positive output is highly debated. However, economists suggest that as the U.S. unemployment rate gets below 5%, the economy is very close to or at full capacity. So at 3.5%, one could argue the level of unemployment is too low, and the U.S. economy is becoming inefficient.
Low unemployment is usually regarded as a positive sign for the economy.
A very low rate of unemployment, however, can have negative consequences, such as inflation and reduced productivity.
When the labor market reaches a point where each additional job added does not create enough productivity to cover its cost, then an output gap, or slack, happens.
The level at which unemployment equals positive output is highly debated. However, economists suggest that as the U.S. unemployment rate gets below 5%, the economy is very close to or at full capacity. So at 3.5%, one could argue the level of unemployment is too low, and the U.S. economy is becoming inefficient.