Monday, February 14, 2011

Natural Rate of Unemployment

Bloomberg details:

The new “normal” unemployment rate may now be 6.7 percent, rising as much as 1.7 percentage points from 5 percent before the recession began, according to researchers at the Federal Reserve Bank of San Francisco.

High rates of long-term joblessness, extended unemployment benefits and a mismatch of skills between workers and available jobs may be impeding a return to the previous level, said John Williams, the bank’s research director, and research associate Justin Weidner in a paper released today.
That's one explanation (and I can't disagree with the above facts), but perhaps the "natural" rate of unemployment was never as low as it appeared from the late 80's through late 00's either.

Source: BLS