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Unemployment and Spare Capacity in the Labour Market

Author

Listed:
  • Alexander Ballantyne

    (Reserve Bank of Australia)

  • Daniel De Voss

    (Reserve Bank of Australia)

  • David Jacobs

    (Reserve Bank of Australia)

Abstract

The unemployment rate provides an important gauge of spare capacity in the labour market and the economy more generally. However, other factors also affect unemployment, which complicates its interpretation when informing monetary policy. Statistical methods can be used to estimate the extent to which the unemployment rate reflects spare capacity versus more enduring structural factors. This involves estimating the NAIRU. Information can also be gleaned from the composition of unemployment, as jobseekers with certain characteristics may be more indicative of spare capacity than others. These approaches suggest that spare capacity in the labour market has increased over the past few years but remains well below that which prevailed over much of the 1990s.

Suggested Citation

  • Alexander Ballantyne & Daniel De Voss & David Jacobs, 2014. "Unemployment and Spare Capacity in the Labour Market," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 7-20, September.
    • Handle: RePEc:rba:rbabul:sep2014-02
    as

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    File URL: https://www.rba.gov.au/publications/bulletin/2014/sep/pdf/bu-0914-2.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Sergio Destefanis & Matteo Fragetta & Giuseppe Mastromatteo & Nazzareno Ruggiero, 2020. "The Beveridge curve in the OECD before and after the great recession," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(3), pages 411-436, September.
    2. David Lancaster & Peter Tulip, 2015. "Okun's Law and Potential Output," RBA Research Discussion Papers rdp2015-14, Reserve Bank of Australia.
    3. Alexandra Rush & David Jacobs, 2015. "Why is Wage Growth So Low?," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 09-18, June.
    4. Chew Lian Chua & Tim Robinson, 2018. "Why Has Australian Wages Growth Been So Low? A Phillips Curve Perspective," The Economic Record, The Economic Society of Australia, vol. 94(S1), pages 11-32, June.
    5. Punnoose Jacob & Martin Wong, 2018. "Estimating the NAIRU and the Natural Rate of Unemployment for New Zealand," Reserve Bank of New Zealand Analytical Notes series AN2018/04, Reserve Bank of New Zealand.
    6. Finn Robinson & Jamie Culling & Gael Price, 2019. "Evaluating indicators of labour market capacity in New Zealand," Reserve Bank of New Zealand Analytical Notes series AN2019/09, Reserve Bank of New Zealand.
    7. Tim Robinson & Viet H. Nguyen & Jiao Wang, 2017. "The Australian Economy in 2016–17: Looking Beyond the Apartment Construction Boom," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 50(1), pages 5-20, March.

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