Natural Rate of Unemployment
What is Natural Rate of Unemployment?
The unemployment rate that persists when the economy is at full strength, also called the NAIRU.
Understanding Natural Rate of Unemployment
Some unemployment always exists because people change jobs and skills do not match openings. The natural rate is the rate consistent with stable inflation; the closely related NAIRU is the non-accelerating inflation rate of unemployment.
It cannot be observed directly and is estimated, with estimates changing over time. When unemployment falls well below it, inflation tends to rise.