The natural rate of unemployment (NAIRU) is a theoretical concept representing the lowest unemployment rate that an economy can sustain without causing inflation to accelerate. It's the unemployment rate that exists when the economy is operating at its potential output.
NAIRU is influenced by various structural factors in the labor market, including:
Frictional Unemployment: The time it takes for workers to transition between jobs.
Structural Unemployment: Mismatch between the skills of workers and the jobs available, often due to technological changes or industry shifts.
Institutional Factors: Government regulations, unionization, minimum wage laws, and the generosity of unemployment benefits can all affect the natural rate.
While NAIRU cannot be directly observed, economists use statistical models and various indicators to estimate it. This calculator provides a simplified model based on common drivers.
Estimated Natural Rate of Unemployment (NAIRU): —%
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function calculateNAIRU() {
var frictionalRateInput = document.getElementById("frictionalRate");
var structuralRateInput = document.getElementById("structuralRate");
var policyImpactInput = document.getElementById("policyImpact");
var nairuResultSpan = document.getElementById("nairuResult");
var frictionalRate = parseFloat(frictionalRateInput.value);
var structuralRate = parseFloat(structuralRateInput.value);
var policyImpact = parseFloat(policyImpactInput.value);
if (isNaN(frictionalRate) || isNaN(structuralRate) || isNaN(policyImpact)) {
nairuResultSpan.textContent = "Invalid Input";
return;
}
// A simplified model where NAIRU is the sum of its components.
// In reality, NAIRU is a complex estimation and not a direct sum.
var nairu = frictionalRate + structuralRate + policyImpact;
nairuResultSpan.textContent = nairu.toFixed(2);
}