Natural Rate of Unemployment
Natural Rate of Unemployment
When national income changes, the amount of employment and that of unemployment change as well. Unemployment follows a cyclical path, increasing during times of recession and decreasing in times of business expansion. The unemployment rate does not, show any important long-term trend over time.
In macroeconomics, scholars name between the natural rate of unemployment made up by frictional and structural unemployment and the rate of cyclical unemployment. The unemployed are those who are without jobs and those who are searching for jobs. The unemployed are often measured as numbers of persons and sometimes as rates, expressed as percentages of the total labor force (Mishkin, 1995).
Over the decades, the economy has accumulated a net increase in new jobs fast enough to employ the high rising number of so-called potential workers. As a result the unemployment rate, which is the differ-ence between the labor force and employment, expressed as a percentage of the labor force has not increased decade by decade. The unemployment rate does change from year to year, because changes in the labor force are not exactly similar to changes in employment. On the supply side, the labor force has grown practically every single year since the end
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