Given today's economic situation, what is the natural rate of unemployment in the U.S today?
To answer that question, we're dusting off an old tool today, which we originally developed back in August 2007 to find out how much slack there was in the job market at that time.
Back then, the U.S. economy was still growing, which it did all the way through the end of that year, as the economic expansion peaked in December 2007 before heading south toward recession in January 2008.
But in August 2007, there were questions of whether the economy was becoming too heated, which is something that might be determined if the official unemployment rate dropped below the "natural" rate of unemployment. In August 2007, we found that the natural rate of unemployment was 4.31%, while the official rate of unemployment was 4.53%, indicating that the economy was not in danger of overheating.
In retrospect, with a recession beginning just five months later, that seems like an understatement.
Today though, the news media is filled with reports that the jobs market has finally turned positive, so our question then has more to do with finding out what its potential for improvement might be.
And that's why we're asking what the natural rate of unemployment might be, because that would define the best case scenario for today's unemployment rate.
To answer the question, we'll be extracting the following data from the following sources:
This report is produced monthly and contains the number of employed and the number of unemployed for the total U.S. civilian workforce. The appropriate data is found in Table A-1 in the data section of the report.
This report is produced quarterly and provides the numbers of those newly hired or who have recently separated from their previous employment in the civilian workforce. This data is found in Table A of the main body of the report.
Political Calculations is a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics.
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