This paper finds that in the United States the full-employment rate of unemployment (FERU) is the geometric average of the unemployment and vacancy rates. Between 1930 and 2024, the FERU averages 4.1% and is very stable.
This paper develops a model of unemployment fluctuations. The innovation is to represent the labor and product markets with a matching structure. The model simultaneously features Keynesian unemployment, classical unemployment, and frictional unemployment.
This paper develops a New Keynesian model in which the government multiplier doubles when the unemployment rate rises from 5% to 8%. The multiplier is so countercyclical because in bad times, on the labor market, job rationing dwarfs matching frictions.
This dashboard provides real-time indicators of US labor market and business cycle conditions. It starts with three core labor market indicators: the unemployment rate, vacancy rate, and labor market tightness. These metrics jointly characterize the functioning of the labor market. From these, the dashboard calculates two metrics that quantify how far the labor market is from social efficiency: the full-employment rate of unemployment (FERU) and the unemployment gap. These two metrics are key determinants of optimal monetary policy and fiscal policy. ...