Is having a small percentage of unemployment a good thing?

Mattie G Indahouse · December 30, 2016, 04:28:40 AM

The economics teacher I had at high school I remember her saying that having a small percentage of unemployment is a good thing, is that actually a good thing? With 0% I would figure that more people working would be more money being spent and more goods being made, moved or whatever.

More Than Mortal · December 30, 2016, 06:03:58 AM

There is a natural rate of unemployment due to factors like labour market churn and structural policy (unemployment in continental Europe, for instance, is often 'naturally' higher than in the US or the UK thanks to heavier labour market regulation). What the natural rate means is that unemployment cannot be permanently reduced below this point by demand management policy, otherwise the economy will overheat and inflation will rise.

MyNameIsCharlie · December 30, 2016, 12:28:34 PM

1-3% is healthy. It represents people being fired/quitting and getting another job. When it gets above this, it means consistent unemployment.

More Than Mortal · December 30, 2016, 01:14:36 PM

Quote from: MyNameIsCharlie on December 30, 2016, 12:28:34 PM

1-3% is healthy.

Not quite. Natural rate for the U.S. is ~5.3%.

MyNameIsCharlie · December 30, 2016, 01:38:48 PM

Quote from: 2016 A SHIT on December 30, 2016, 01:14:36 PM

Quote from: MyNameIsCharlie on December 30, 2016, 12:28:34 PM
1-3% is healthy.
Not quite. Natural rate for the U.S. is ~5.3%.

Depends on what you count in it. If you have disheartened searchers in, that sounds about right.

More Than Mortal · December 30, 2016, 01:42:56 PM

Quote from: MyNameIsCharlie on December 30, 2016, 01:38:48 PM

Depends on what you count in it.

No, it doesn't. It's all expressed as U3.

I was a bit off, though; FRED puts the current NAIRU at 4.8%.