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  • Q: What's your assessment of where NAIRU is now?
  • A: A lot of economists think it has moved up to some significant extent above where we think it was before. The reason is that the usual matching has become less effective, when you have a turbulent downturn and big switches in demand from services to goods and all that. It could be higher, and my own instinct is that the natural rate of unemployment is higher. We can never know where these star variables are in real time with any confidence, but it must have moved up materially.
  • The other side of that, as all these jobs get created and people go back to work and unemployment is so low, you could see it coming back down pretty significantly and that would also, by the way, take pressure off inflation.
  • Logically, if the pandemic and the disorder in the labor market caused the natural rate to move up, then, as the labor market settles down, in principle, you should see it move back down.

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