Tags: Normal | Unemployment | Rate | 6.7 Percent | Fed

‘Normal’ Unemployment Rate May Be 6.7 Percent, Fed Paper Says

Monday, 14 Feb 2011 03:18 PM

The new “normal” unemployment rate may now be 6.7 percent, rising as much as 1.7 percentage points from 5 percent before the recession began, according to researchers at the Federal Reserve Bank of San Francisco.

High rates of long-term joblessness, extended unemployment benefits and a mismatch of skills between workers and available jobs may be impeding a return to the previous level, said John Williams, the bank’s research director, and research associate Justin Weidner in a paper released today.

The U.S. jobless rate was 9 percent as of January, marking 21 straight months in which it has remained at or above 9 percent. Fed officials noted after their most recent meeting in January that the economy isn’t expanding enough to bring a “significant improvement” to labor markets.

“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 percent,” Williams and Weidner said. “Much of this increase is likely to prove temporary” and “even with such an increase, sizeable labor market slack is expected to persist for years.”

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The new normal unemployment rate may now be 6.7 percent, rising as much as 1.7 percentage points from 5 percent before the recession began, according to researchers at the Federal Reserve Bank of San Francisco.High rates of long-term joblessness, extended unemployment...
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