US: Cause of Unemployment

“But there’s some risk they don’t get it at all. For one thing, the Fed underestimates the strength of structural forces pulling the economy back to a new normal,” - Edmund Phelps

One area of disagreement focuses on the natural rate of unemployment. The higher the natural rate, the less policymakers can do to stimulate the economy without stoking higher prices, and the more crucial it is for the U.S. to take other steps, such as retraining workers. Phelps, who teaches at Columbia University and who helped pioneer the concept of the natural rate, estimates it has climbed to about 7 percent from 5.5 percent since the mid-1990s.


Source: BusinessWeek