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What is the new normal unemployment rate?

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Abstract

Recent labor markets developments, including mismatches in the skills of workers and jobs, extended unemployment benefits, and very high rates of long-term joblessness, may be impeding the return to \\"normal\\" unemployment rates of around 5%. An examination of alternative measures of labor market conditions suggests that the \\"normal\\" unemployment rate may have risen as much as 1.7 percentage points to about 6.7%, although much of this increase is likely to prove temporary. Even with such an increase, sizable labor market slack is expected to persist for years.

Suggested Citation

  • Justin Weidner & John C. Williams, 2011. "What is the new normal unemployment rate?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue feb14.
    • Handle: RePEc:fip:fedfel:y:2011:i:feb14:n:2011-05
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    Citations

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    Cited by:

    1. Waters, George A., 2013. "Quantity rationing of credit and the Phillips curve," Journal of Macroeconomics, Elsevier, vol. 37(C), pages 68-80.
    2. John Schmitt, 2011. "Labor Market Policy in the Great Recession: Some Lessons from Denmark and Germany," CEPR Reports and Issue Briefs 2011-12, Center for Economic and Policy Research (CEPR).
    3. Yu-Fan Huang & Sui Luo, 2018. "Potential output and inflation dynamics after the Great Recession," Empirical Economics, Springer, vol. 55(2), pages 495-517, September.
    4. Ryan Herzog, 2013. "Using state level employment thresholds to explain Okun’s Law," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-26, December.
    5. Gonul Sengul & Murat Tasci, 2014. "Unemployment Flows, Participation and the Natural Rate for Turkey," Working Papers 1435, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    6. Ryan W Herzog, 2013. "An Analysis of Okun's Law, the Natural Rate, and Voting Preferences for the 50 States," Economics Bulletin, AccessEcon, vol. 33(4), pages 2504-2517.
    7. Aysun, Uluc & Bouvet, Florence & Hofler, Richard, 2014. "An alternative measure of structural unemployment," Economic Modelling, Elsevier, vol. 38(C), pages 592-603.
    8. Sengul, Gonul & Tasci, Murat, 2020. "Unemployment flows, participation, and the natural rate of unemployment: Evidence from turkey," Journal of Macroeconomics, Elsevier, vol. 64(C).
    9. Athanasios Orphanides, 2012. "Commentary: the United States labor market: status quio pr a new normal?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 453-462.
    10. Pavlina R. Tcherneva, 2012. "Reorienting Fiscal Policy after the Great Recession," Economics Working Paper Archive wp_719, Levy Economics Institute.
    11. John C. Williams, 2011. "Will the financial crisis have a lasting effect on unemployment?," Speech 83, Federal Reserve Bank of San Francisco.
    12. Pavlina R. Tcherneva, 2012. "Full Employment through Social Entrepreneurship: The Nonprofit Model for Implementing a Job Guarantee," Economics Policy Note Archive 12-02, Levy Economics Institute.
    13. John C. Williams, 2015. "The economic outlook: live long and prosper," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.

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