Unemployment and Spare Capacity in the Labour Market

Alexander Ballantyne, Daniel De Voss and David Jacobs
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Alexander Ballantyne: Reserve Bank of Australia
Daniel De Voss: Reserve Bank of Australia
David Jacobs: Reserve Bank of Australia

RBA Bulletin (Print copy discontinued), 2014, 7-20

Abstract: The unemployment rate provides an important gauge of spare capacity in the labour market and the economy more generally. However, other factors also affect unemployment, which complicates its interpretation when informing monetary policy. Statistical methods can be used to estimate the extent to which the unemployment rate reflects spare capacity versus more enduring structural factors. This involves estimating the NAIRU. Information can also be gleaned from the composition of unemployment, as jobseekers with certain characteristics may be more indicative of spare capacity than others. These approaches suggest that spare capacity in the labour market has increased over the past few years but remains well below that which prevailed over much of the 1990s.

Keywords: Unemployment; Employment; Labour market; Labour force; Slack; Cyclical unemployment; Spare capacity; Output gap; NAIRU; Natural rate; Phillips curve; Inflation; Prices; Wages; Job matching; Long-term unemployment; Unemployment duration; Structural unemployment; Frictional unemployment; Reasons for unemployment; Gruen, Pagan and Thompson (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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