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Federal Reserve Bank of San Francisco
FRBSF Economic Letter
Unemployment: Lower for Longer?
Nicolas Petrosky-Nadeau
Robert G. Valletta

Unemployment is running near its 50-year low, but inflation has not picked up as expected. This suggests that the unemployment rate consistent with stable inflation has fallen. Combining a conventional Phillips curve tradeoff between unemployment and inflation with a noninflationary unemployment rate that can change over time shows that estimates of this unemployment threshold have declined toward 4% in recent years. One possible reason for this decline is improvements in how job matches are made, reflected in unusually favorable job-finding rates for disadvantaged groups.

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Nicolas Petrosky-Nadeau & Robert G. Valletta, "Unemployment: Lower for Longer?" , Federal Reserve Bank of San Francisco, FRBSF Economic Letter, number 21, 2019.
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