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Federal Reserve Bank of San Francisco
FRBSF Economic Letter
The Natural Rate of Unemployment over the Past 100 Years
Regis Barnichon
Christian Matthes
Abstract

The natural rate of unemployment, or u-star, is used by economists and policymakers to help assess the overall state of the labor market. However, the natural rate is not directly observable and must be estimated. A new statistical approach estimates the natural rate over the past 100 years. Results suggest the natural rate has been remarkably stable over history, hovering between 4.5 and 5.5% for long periods, even during the Great Depression. Recent readings on the unemployment rate have been running slightly below the natural rate estimate.


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Regis Barnichon & Christian Matthes, "The Natural Rate of Unemployment over the Past 100 Years" , Federal Reserve Bank of San Francisco, FRBSF Economic Letter, number 23, 2017.
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