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Unemployment after the recession: a new natural rate?

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  • Murat Tasci
  • Saeed Zaman
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    Abstract

    The past recession has hit the labor market especially hard, and economists are wondering whether some fundamentals of the market have changed because of that blow. Many are suggesting that the natural rate of long-term unemployment—the level of unemployment an economy can’t go below—has shifted permanently higher. We use a new measure that is based on the rates at which workers are finding and losing jobs and which provides a more accurate assessment of the natural rate. We find that the natural rate of unemployment has indeed shifted higher—but much less so than has been suggested. Surprising trends in both the job-finding and job-separation rates explain much about the current state of the unemployment rate.

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    File URL: http://www.clevelandfed.org/research/commentary/2010/2010-11.pdf
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    Bibliographic Info

    Article provided by Federal Reserve Bank of Cleveland in its journal Economic Commentary.

    Volume (Year): (2010)
    Issue (Month): Sep 08 ()
    Pages:

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    Handle: RePEc:fip:fedcec:y:2010:i:sep08:n:2010-11

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    Related research

    Keywords: Unemployment ; Recessions ; Economic conditions - United States;

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    1. Guillaume Rocheteau, 2006. "Understanding unemployment," Economic Commentary, Federal Reserve Bank of Cleveland, issue Oct 15.
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