[Federal Reserve Bank San Francisco Economic Letter 2022-14, by Brandyn Bok and Nicolas Petrosky-Nadeau]
Before the pandemic, the U.S. unemployment rate reached a historic low that was close to estimates of its underlying longer-run value and the short-run level associated with an absence of inflationary pressures. After two turbulent years, unemployment has returned to its pre-pandemic low, and the estimated underlying longer-run unemployment rate appears largely unchanged. However, economic disruptions appear to have pushed up the short-run noninflationary rate substantially, as high as 6%. Examining these different measures of the natural rate of unemployment can provide useful insights for policymakers.