You are here

'Natural' rate of US unemployment could fall to 4.4%: Fed paper

CLAIMS32432.jpg
Job seekers fill out applications at the Choice Career Fair in San Antonio, Texas, U.S., on April 16, 2015. Changes in the US labour force may allow the economy to sustain a much lower rate of joblessness in the future without fear of inflation, a team at the Chicago Federal Reserve Bank said on Monday in research that could support more dovish interest rate policies.

Changes in the US labour force may allow the economy to sustain a much lower rate of joblessness in the future without fear of inflation, a team at the Chicago Federal Reserve Bank said on Monday in research that could support more dovish interest rate policies.

The natural rate of unemployment has fallen recently to 5 per cent or less, and could fall to around 4.4 per cent to 4.8 per cent by 2020, the researchers said in the latest Chicago Fed Letter.

The Chicago Fed paper, spearheaded by chief researcher Daniel Sullivan and microeconomic specialist Daniel Aaronson, showed the natural rate of unemployment falling as the US population ages and more people stay in school longer.

By contrast, Fed officials on average estimate the long-run sustainable rate to be about 5.1 per cent. The unemployment rate is now at 5.4 per cent, and some Fed officials have worried publicly about leaving interest rates near zero when the unemployment rate is approaching widely accepted measures of full employment.

sentifi.com

Market voices on:

A lower natural rate of unemployment suggests the Fed can keep rates lower for longer to spur investment and job creation without worrying about kindling an unwanted rise in inflation. The natural rate is, however, notoriously difficult to estimate and changes over time, so the Fed does not officially target any specific rate of unemployment as it seeks to fulfill its mandate to bring the economy to full employment.

REUTERS

grab

Receive $80 Grab vouchers valid for use on all Grab services except GrabHitch and GrabShuttle when you subscribe to BT All-Digital at only $0.99*/month.

Find out more at btsub.sg/promo

Powered by GET.comGetCom