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What is the new normal unemployment rate?

Author

Listed:
  • Justin Weidner
  • John C. Williams

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. repec:spr:empeco:v:55:y:2018:i:2:d:10.1007_s00181-017-1293-7 is not listed on IDEAS
    4. 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.
    5. 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.
    6. Aysun, Uluc & Bouvet, Florence & Hofler, Richard, 2014. "An alternative measure of structural unemployment," Economic Modelling, Elsevier, vol. 38(C), pages 592-603.
    7. 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.
    8. Pavlina R. Tcherneva, 2012. "Reorienting Fiscal Policy after the Great Recession," Economics Working Paper Archive wp_719, Levy Economics Institute.
    9. John C. Williams, 2011. "Will the financial crisis have a lasting effect on unemployment?," Speech 83, Federal Reserve Bank of San Francisco.
    10. 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.
    11. Williams, John C., 2015. "The economic outlook: live long and prosper," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.

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