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Conclusion: How Low Will the Unemployment Rate Go?

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Abstract

A major theme of the posts in our labor market series has been that the outflows from unemployment, either into employment or out of the labor force, have been the primary determinant of unemployment rate dynamics in long expansions. The key to the importance of outflows is that within long expansions there have not been adverse shocks that lead to a burst of job losses. To illustrate the power of this mechanism, we presented simulations in a previous post that were based on the movements in the outflow and inflow rates in the previous three expansions. These simulated paths show the unemployment rate declining to a level well below current consensus predictions over the medium term.

Suggested Citation

  • Jonathan McCarthy & Simon M. Potter & Ayşegül Şahin, 2012. "Conclusion: How Low Will the Unemployment Rate Go?," Liberty Street Economics 20120402, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:86798
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