What is the natural rate of unemployment? What can cause it to change over time?

The natural rate of unemployment is defined as the rate of unemployment made up of those who are frictionally unemployed and structurally unemployed. The idea is that you will never have full employment because these two types of unemployment will always exist. Also, these types of unemployment are common and not unhealthy, and so the goal in an economy is not to reach full employment but to reach the natural rate of unemployment. I believe PPFs(production possibilities frontiers) are today calculated with the natural rate of unemployment in mind.

Frictional unemployment is unemployment that occurs when people are simply in-between jobs. They quit their last job and are looking for a better one, or they got fired and are temporarily unemployed... it happens every day, and typically another job cannot be found the same day, so there are a number of people who are unemployed for a short duration of time. Again, this is a normal and common form of unemployment.

Structural unemployment is unemployment that results from a business shutting down or laying off people, as a result of the economy changing its %26quot;structure.%26quot; When structural changes occur, unemployment occurs as the laid-off workers seek to find jobs with other firms. Like I said before, jobs cannot typically be found instantly, so there is a duration where these employees are considered %26quot;unemployed.%26quot;

The business cycles of the economy can cause the natural rate of unemployment to change over time. When the economy is booming, fewer companies are structurally downsizing and more jobs open up, increasing the job finding rate and reducing the job separation rate and reducing the natural rate of unemployment. The opposite occurs when the economy is recessing.

Hope that helps.