Unemployment Rate Benchmarks

RePEc Short ID: pcr107
ORCID iD: 0000-0002-7958-1818

Crump, Richard K.; Nekarda, Christopher J.; Petrosky-Nadeau, Nicolas

doi:10.17016/FEDS.2020.072

Working Paper

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.

Keywords: Labor market; Monetary policy; Unemployment; Business cycles;

JEL Classification: E24; E32; J60;

https://doi.org/10.17016/FEDS.2020.072