Why should the Fed be frantically searching for the “natural” unemployment rate, which will only incite debate and discord, when it can much more easily find the “adequate” level of spending (NGDP), which is something that it can directly affect?
Meeting minutes from the Federal Reserve‘s late-June gathering suggested the debate over the future of monetary policy stimulus is being fought over what officials think is the true level of “natural” unemployment.
The rate in question isn’t one that can ever be definitively measured. Still, the idea is very important to economists and policy makers, because it is this level of joblessness that plays a starring role in driving inflation. Thus, it guides how stimulative or restrictive monetary policy might need to be.