 u* = √uvPascal Michaillat and Emmanuel Saez No 30211, NBER Working Papers from National Bureau of Economic Research, Inc Abstract: Most governments are mandated to maintain their economies at full employment. We propose that the best marker of full employment is the efficient unemployment rate, u*. We define u* as the unemployment rate that minimizes the nonproductive use of labor—both jobseeking and recruiting. The nonproductive use of labor is well measured by the number of jobseekers and vacancies, u + v. Through the Beveridge curve, the number of vacancies is inversely related to the number of jobseekers. With such symmetry, the labor market is efficient when there are as many jobseekers as vacancies (u = v), too tight when there are more vacancies than jobseekers (v > u), and too slack when there are more jobseekers than vacancies (u > v). Accordingly, the efficient unemployment rate is the geometric average of the unemployment and vacancy rates: u* = √uv. We compute u* for the United States between 1930 and 2022. We find for instance that the US labor market has been over full employment (u JEL-codes: E24 E32 E52 E61 J63 J64 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:30211 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC. |
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