QUOTE:
In modern economies, the supply of workers always exceeds the number of available jobs. This situation is intentional. It is called the %26quot;natural rate of unemployment,%26quot; and economists peg the optimal rate at 6 percent. When the actual unemployment rate goes above or below this, the Fed usually contracts or expands the money supply to bring it back in line.
Why would the Fed do this? Because our economy needs a reserve pool of labor to remain flexible and capable of change. This way, there is always a percentage of the work force that is educating or retraining itself. It also allows the market to fill sudden demands of labor. If we were to somehow achieve 100 percent employment, stresses and strains would only begin growing within our economy. The natural rate of unemployment is therefore a cost of doing business, and as such, businesses should pay for it (through unemployment compensation, for instance).
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