Estimating Natural Rates of Unemployment: A Primer

Authors

Richard K. Crump

Christopher J. Nekarda

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2023-25 | August 1, 2023

Before the pandemic, the U.S. unemployment rate reached a historic low that was close to estimates of its underlying longer-run value and the short-run level associated with an absence of inflationary pressures. After two turbulent years, unemployment returned to its pre-pandemic low, and the estimated underlying longer-run unemployment rate appeared largely unchanged. However, economic disruptions pushed up the short-run noninflationary rate substantially, as high as 6%. This primer examines these different measures of the natural rate of unemployment and discusses how they can provide useful insights for policymakers.

About the Authors
Nicolas Petrosky-Nadeau is a vice president in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Nicolas Petrosky-Nadeau
Brandyn Bok is a research associate in the Economic Research Department of the Federal Reserve Bank of San Francisco.