Question #153034
The natural unemployment rate in the United States has varied over the
last 50 years. According to the Congressional Budget Office, the natural
rate was 5.5% in 1960, rose to about 6.5% in the 1970s, and had declined
to about 4.8% by 2000. What do you think might have caused this
variation?
last 50 years. According to the Congressional Budget Office, the natural
rate was 5.5% in 1960, rose to about 6.5% in the 1970s, and had declined
to about 4.8% by 2000. What do you think might have caused this
variation?
Expert's answer
The changes in the natural unemployment rate in the United States were caused by two main reasons:
1) as a result of the population growth in the postwar years or the so-called baby boom in the 1970s the share of young working people increased. Since young workers have a higher unemployment rate than older workers, the aggregate unemployment rate rose then.
2) due to the aging baby boomer generation the natural unemployment rate decreased by 2000.
