How close is the current unemployment rate to the natural rate? What effect does this have on the economy? Why

Question

This question was a discussion question asked after a web field trip.

Answer 1

The Natural Rate of Unemployment is a tricky concept. Most economists prefer to refer to the Non-Accelerating Inflation Rate of Unemployment (NAIRU). Generally the natural rate is important because if unemployment drops below it, inflation is expected to pick up, and if unemployment is above it, prices should come down.

Traditionally (when the theory behind it was first developed) NAIRU had been accepted at between 5.5 and 6 percent. However, current unemployment is well under that rate, at 4.6%, and has been in this range for some time without any serious signs of upticks in inflation. This has prompted many economist to suggest that NAIRU is much lower (explainations for why vary).

Answer 2

Heard of the idea Natural unemployment, but I never thought about it much since I thought natural unemployment is something I never really think can be set in stone. It depends on the tax structure of the country. High tax countries usually have higher unemployment, but yet Sweden has lower unemployment in France because of a lot more flexible labor laws. In truth, rigid labor laws cause more unemployment than does taxation a lot of times. That is why in Southern Europe they hire people Thur temps a lot because to hire a person full time means they are there for life pretty much because the labor regulations set it up where it take 100 days to fire the person.

Answer 3

Probably higher (current) in some states....The economy is faltering for the poor, and the wealthy are able to make ends meet.