Challenges with Estimating U Star in Real Time

Murat Tasci

Economic Commentary, 2019, issue November

Abstract: Although the concept of the natural rate of employment, NAIRU, or ?U star? is used to measure the amount of slack in the labor market, it is an unobservable quantity that must be estimated using data currently available. This Commentary investigates the degree to which our estimates of U star at various points in the current business cycle have changed as real-time data have been revised and as more data points have accumulated. I find that the availability of additional data has contributed to a significant change in our estimates of U star at earlier points in the business cycle, a result that suggests we might have been underestimating the level of labor market slack during some of the recent recovery period. In retrospect, our updated estimates of U star suggest labor markets were not as tight as we thought they were then.

Keywords: estimates; Labor market; unemployment (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.26509/frbc-ec-201918 Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcec:00110

Ordering information: This journal article can be ordered from
publications@clev.frb.org

DOI: 10.26509/frbc-ec-201918

Access Statistics for this article

More articles in Economic Commentary from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library (4d.library@clev.frb.org).