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Changing Labor Force Composition and the Natural Rate of Unemployment

Author

Listed:
  • Daniel Aaronson
  • Luojia Hu
  • Arian Seifoddini
  • Daniel G. Sullivan

Abstract

This article discusses why changes in the composition of the labor force may have lowered the natural (or trend) rate of unemployment?the unemployment rate that would prevail in an economy making full use of its productive resources?to 5 percent or less. A lower natural rate may help explain why wage inflation and price inflation remain low despite actual unemployment recently reaching 5.5 percent?a figure only slightly above prominent estimates of the natural rate, such as that of the Congressional Budget Office (CBO). Demographic and other changes should continue to lower the natural rate for at least the remainder of the decade.

Suggested Citation

  • Daniel Aaronson & Luojia Hu & Arian Seifoddini & Daniel G. Sullivan, 2015. "Changing Labor Force Composition and the Natural Rate of Unemployment," Chicago Fed Letter, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhle:00026
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    Citations

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    Cited by:

    1. Janet L. Yellen, 2017. "Inflation, uncertainty, and monetary policy," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(4), pages 194-207, October.
    2. Janet L. Yellen, 2017. "Inflation, Uncertainty, and Monetary Policy : a speech at the \"Prospects for Growth: Reassessing the Fundamentals\" 59th Annual Meeting of the National Association for Business Economics, C," Speech 971, Board of Governors of the Federal Reserve System (U.S.).
    3. Lars Osberg, 2018. "Full Employment in Canada in the early 21st Century," Working Papers daleconwp2018-02, Dalhousie University, Department of Economics.
    4. Tüzemen, Didem, 2019. "Job polarization and the natural rate of unemployment in the United States," Economics Letters, Elsevier, vol. 175(C), pages 97-100.

    More about this item

    Keywords

    labor; unemployment;

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