Is The New ‘Normal’ Unemployment Rate Above 5%?

Unemployed Man - Exhibitor at APExpo 2010 012The Federal Reserve Bank of San Francisco, in its Economic Letter entitled “What Is the New Normal Unemployment Rate?” states:

“Recent labor markets developments, including mismatches in the skills of workers and jobs, extended unemployment benefits, and very high rates of long-term joblessness, may be impeding the return to “normal” unemployment rates of around 5%. An examination of alternative measures of labor market conditions suggests that the “normal” unemployment rate may have risen as much as 1.7 percentage points to about 6.7%, although much of this increase is likely to prove temporary. Even with such an increase, sizable labor market slack is expected to persist for years.”

Their conclusion? “As the recovery proceeds, we should develop a clearer picture of the new normal rate of unemployment.”

The question becomes, what happens to that ‘extra’ 1.7% of US population? Are they unjustifiably unemployed, if we assume that 5% is truly normal for a super-rich society like our own? Or is this just capitalism and tough luck?

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  • razzlebathbone

    As long as one person seeks work and cannot obtain it, the hours of the standard workday are too long.

  • Anonymous

    As long as one person seeks work and cannot obtain it, the hours of the standard workday are too long.

  • http://voxmagi-necessarywords.blogspot.com/ VoxMagi

    The numbers for real time unemployment and under employment have been fudged for almost thirty years…each succeeding generation fudging them a little more to keep discontent at a minimum. America’s real rates of un&under employment put us close to 1 in 5 looking for better work or any work. Until we start using numbers more accurate than the rate of persons seeking unemployment compensation, we will NEVER have an accurate tally of how bad things really are.

  • http://voxmagi-necessarywords.blogspot.com/ VoxMagi

    The numbers for real time unemployment and under employment have been fudged for almost thirty years…each succeeding generation fudging them a little more to keep discontent at a minimum. America’s real rates of un&under employment put us close to 1 in 5 looking for better work or any work. Until we start using numbers more accurate than the rate of persons seeking unemployment compensation, we will NEVER have an accurate tally of how bad things really are.

  • 5by5

    Well considering that they were improperly counting the real numbers up until now, that’s probably BEEN the “norm” for some time.

  • 5by5

    Well considering that they were improperly counting the real numbers up until now, that’s probably BEEN the “norm” for some time.

  • Cocomaan

    Thanks for the comments, folks. While I understand frustration with the nominal BLS’ counts (trust me, I’m the first to complain), I think that this issue of pervasive and expanding routine unemployment is worth considering.

  • Cocomaan

    Thanks for the comments, folks. While I understand frustration with the nominal BLS’ counts (trust me, I’m the first to complain), I think that this issue of pervasive and expanding routine unemployment is worth considering.