The Humphrey-Hawkins Act, formally the Full Employment and Balanced Growth Act of 1978, is the federal law that requires the government to pursue full employment and price stability at the same time. Its most durable effect was rewriting the Federal Reserve’s legal instructions, giving the central bank the dual mandate it still operates under today. Signed by President Jimmy Carter after years of stagflation, the law also set specific numerical targets for unemployment and inflation, but those benchmarks carried no penalties and eventually expired.
What the Law Actually Did
Before 1978, federal economic responsibilities rested on the Employment Act of 1946, a broad post-war statute that created the Council of Economic Advisers and the Joint Economic Committee and committed the government generally to maintaining employment opportunities. The Humphrey-Hawkins Act amended that earlier law with something much more concrete: numerical goals for unemployment, inflation, and productivity, plus a requirement that the President and the Federal Reserve report regularly on what they were doing about them.
The statute declares that the federal government should use all practical means to promote full employment, real income growth, balanced growth, a balanced federal budget, and reasonable price stability.1Office of the Law Revision Counsel. 15 USC 3101 – Congressional Findings It also makes clear that the private sector, not government spending, should be the primary source of new jobs. Federal policy is meant to support private enterprise rather than replace it.2U.S. Government Publishing Office. 15 USC 1021 – Congressional Declarations
The congressional findings inside the statute are direct about the costs of unemployment. Lost output, reduced tax revenue, family disruption, increased spending on public assistance and criminal justice, and effects on mental health and substance abuse all appear in the text.1Office of the Law Revision Counsel. 15 USC 3101 – Congressional Findings The law treats high joblessness as a source of real social harm, not just economic inefficiency.
How It Changed the Federal Reserve
The most consequential piece of the Act was a single amendment to the Federal Reserve Act. Section 2A, codified at 12 U.S.C. § 225a, directs the Board of Governors and the Federal Open Market Committee to maintain money supply growth in line with the economy’s long-run potential “so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”3Office of the Law Revision Counsel. 12 USC 225a – Maintenance of Long Run Growth of Monetary and Credit Aggregates
The statute lists three objectives, but economists and Fed officials describe it as the dual mandate. Moderate long-term interest rates are treated as a natural result of achieving the other two. In practice, the Fed raises short-term interest rates when inflation runs too high and lowers them when unemployment climbs. Every FOMC vote traces back to this balancing act.
Before this amendment, the Federal Reserve had no single, clearly stated statutory objective. The Humphrey-Hawkins change locked in the framework that still governs monetary policy today and gave Congress a concrete standard against which to measure the Fed’s performance.
The Numerical Targets and Why They Fizzled
The Act did not stop at general principles. Within five years of the first Economic Report submitted under the law, unemployment was supposed to fall to no more than 4% for workers aged 16 and older, and no more than 3% for workers aged 20 and older.4Congress.gov. H.R. 50 – Full Employment and Balanced Growth Act of 1978 Inflation was supposed to come down to 3% or less in the same window, with a further goal of 0% inflation by 1988.5Federal Reserve Bank of San Francisco. The Goals of U.S. Monetary Policy
There was a built-in hierarchy. The law specified that the push toward lower inflation should not interfere with the full-employment goal. If policymakers had to choose, the statute told them to prioritize jobs.
None of it had teeth. The Act included no penalty for missing its targets. No agency faced sanctions, no official could be removed, and no citizen could sue the government for failing to deliver 3% unemployment. The statute did authorize the President to propose supplementary programs, including public employment, when general policies proved insufficient,6Office of the Law Revision Counsel. 15 USC 3111 – Countercyclical Employment Policies but that language gave the President discretion to recommend, not a duty to act. No president has used it to launch a large-scale public jobs program.
Senator Humphrey’s original vision was more aggressive. He wanted the government to directly provide jobs when private employment fell short. That idea did not survive the legislative process. What passed retained a provision directing the President to create “reservoirs” of public employment projects for workers who could not find private-sector jobs,4Congress.gov. H.R. 50 – Full Employment and Balanced Growth Act of 1978 but with a two-year delay before it could take effect and conditions that made activation unlikely.
The targets themselves were aspirational from the start. By the early 1980s, Federal Reserve Chair Paul Volcker raised interest rates sharply to break inflation, pushing unemployment well above the Act’s benchmarks. That approach contradicted the law’s instruction to prioritize employment over price stability. Nobody was hauled into court over the deviation.
What Survived: The Modern Framework
The original reporting provisions expired in 2000, and with them any pretense of chasing 0% inflation or 3% unemployment on a fixed timeline. What survived is the dual mandate itself. Section 2A of the Federal Reserve Act still carries the same language about maximum employment, stable prices, and moderate long-term interest rates.3Office of the Law Revision Counsel. 12 USC 225a – Maintenance of Long Run Growth of Monetary and Credit Aggregates
With the specific benchmarks gone, the Fed defined “stable prices” for itself. In January 2012, it formally adopted a 2% annual inflation target measured by the Personal Consumption Expenditures price index, and it reaffirms that target each year in its Statement on Longer-Run Goals and Monetary Policy Strategy. The reasoning is that a small, predictable rate of inflation anchors expectations so that households and businesses do not build price instability into their spending decisions.
In 2020, the Fed updated the framework again, adopting “flexible average inflation targeting.” Rather than treating 2% as a ceiling, the Fed would tolerate inflation running somewhat above 2% for a time after a period of below-target inflation, keeping the average on track.7Federal Reserve Board. A Roadmap for the Federal Reserve’s 2025 Review of Its Monetary Policy Framework
Reporting and Oversight Today
Congress replaced the original Humphrey-Hawkins reporting schedule with a permanent framework under 12 U.S.C. § 225b. The Chair of the Federal Reserve appears before Congress at semi-annual hearings to discuss the Fed’s monetary policy objectives, activities, and economic outlook.8Office of the Law Revision Counsel. 12 USC 225b – Appearances Before and Reports to the Congress The appearances alternate between the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs, with the other committee free to request a follow-up hearing.
Alongside each hearing, the Fed submits a written Monetary Policy Report covering employment, unemployment, production, investment, real income, productivity, exchange rates, trade, and prices. The hearings themselves are still informally called “Humphrey-Hawkins testimony” decades after the original provisions lapsed, and they remain closely watched because any hint about future interest rate moves can move bond and stock markets within minutes.
On the executive side, the President must transmit an annual Economic Report to Congress within 10 days of submitting the federal budget. That report must include trends and forecasts for employment, production, income, prices, and trade, along with numerical goals and specific employment objectives for subgroups of the workforce including youth, women, minorities, veterans, and older workers.9U.S. Government Publishing Office. 15 USC 1022 – Economic Report of President The Council of Economic Advisers submits its own annual report at the same time.
Why It Still Matters
The Humphrey-Hawkins Act matters today almost entirely because of the dual mandate. Every FOMC decision to raise, lower, or hold interest rates happens under the legal framework this law created. When the Fed Chair faces pointed congressional questions about whether policy is doing enough for workers or too much on inflation, that exchange traces to structures the Act put in place.
The numerical targets are gone. The public employment provisions were never used. What endures is the requirement that the central bank cannot legally focus on inflation alone while ignoring employment. That shapes mortgage rates, business lending, job growth, and the cost of living. Other major central banks, including the European Central Bank, operate under mandates that prioritize price stability above all else. The Humphrey-Hawkins Act is the reason the Fed does not.