Natural Rate of Unemployment

The Natural Rate of Unemployment refers to the level of unemployment that exists when the economy is healthy and functioning efficiently. It includes people transitioning between jobs, entering the workforce, or retraining for new skills. This rate doesn’t account for cyclical unemployment, which occurs during economic downturns. Essentially, it reflects a balance where the skills of the workforce match available jobs, and it helps economists understand how well the economy is performing without inflationary pressures. The Natural Rate is a crucial concept for policymakers aiming to maintain economic stability.