Should-Read: Ned Phelps: Nothing Natural About the Natural Rate of Unemployment

Should-Read: Ned Phelps: Nothing Natural About the Natural Rate of Unemployment: “A compelling hypothesis is that workers, shaken by the 2008 financial crisis and the deep recession that resulted…

…have grown afraid to demand promotions or to search for better-paying employers–despite the ease of finding work in the recently tight labor market. A corollary hypothesis is that employers, disturbed by the extremely slow growth of productivity, especially in the past ten years, have grown leery of granting pay raises–despite the return of demand to pre-crisis proportions…. This does not mean there is no natural unemployment rate, only that there is nothing natural about it. There never was.