Natural Unemployment
The lowest rate of unemployment that an economy can sustain over the long run. Keynesians believe that a government can lower the rate of unemployment (i.e. employ more people) if it were willing to accept a higher level of inflation (the idea behind the Phillips Curve). However, critics of this say that the effect is temporary and that unemployment would bounce back up but inflation would stay high. Thus, the natural, or equilibrium, rate is the lowest level of unemployment at which inflation remains stable. Also known as the "non-accelerating inflation rate of unemployment" (NAIRU).
Investopedia Commentary
When the economy is said to be at full employment, it is at its natural rate of unemployment. Economists debate how the natural rate might change. For example, some economists think that increasing labor-market flexibility will reduce the natural rate. Other economists dispute the existence of a natural rate altogether!
Related Links
Surveying The Employment Report
Macroeconomic Analysis
Why the CPI Is a Friend to Investors
See also: Cyclical Unemployment, Frictional Unemployment, Keynesian Economics, Phillips Curve, Structural Unemployment
Also spelled: Natural Unemployment Rate, Non Accelerating Inflation Rate of UnemploymentNAIRU