Unemployment Rate Benchmarks

Abstract

This paper discusses various concepts of unemployment rate benchmarks that are frequently used by policymakers for assessing the current state of the economy as it relates to the pursuit of both price stability and maximum employment. In particular, we propose two broad categories of unemployment rate benchmarks: (1) a longer-run unemployment rate expected to prevail after adjusting to business cycle shocks and (2) a stable-price unemployment rate tied to inflationary pressures. We describes how various existing measures used as benchmark rates fit within this taxonomy with the goal of facilitating the use of a common set of terms for assessments of the current state of the economy and deliberations among policymakers.

Publication
Crump, Richard K., Christopher J. Nekarda, and Nicolas Petrosky-Nadeau (2020). “Unemployment Rate Benchmarks,” Finance and Economics Discussion Series 2020-072. Washington: Board of Governors of the Federal Reserve System, August 2020.

Other versions

Next
Previous