US long-run unemployment reaches lowest point in history
I first published this article on the National Institute of Economic and Social Research blog . It is reproduced here with permission. The natural rate of unemployment of the US economy has reached a lowest point since at least 1949. How can we explain such an achievement? And does it matter? In this blog post, I will explain what we mean by the natural rate of unemployment, give two explanations for its secular decline, and present one challenge ahead. 1. Different measures of the natural rate of unemployment point down At its June 13-14 meeting, the Federal Reserve Board’s Open Market Committee (FOMC) decreased its median estimate of the long-term unemployment rate from 4.7 to 4.6 per cent. This is the latest in a number of downward revisions of the FOMC’s estimate of normal unemployment over the past five years, which have amounted to about 1 percentage point in total (figure 1). According to the Fed’s publication, long-term unemployment rate is defined as the “unemployment