It's not "easily quantifiable", because it's not fixed. It can be quantified as fluctuating within a narrow range.
Why Zero Unemployment Isn't as Good as It Sounds
The natural rate of unemployment is a combination of frictional, structural, and surplus unemployment. Even a
healthy economy will have this level of unemployment because workers are always coming and going, looking for better jobs. This jobless status, until they find that new job, is the natural rate of unemployment.
The
Federal Reserve estimates this rate to be between 4.5 percent and 5 percent. Both
fiscal and
monetary policymakers use that rate as the goal of full employment. They use 2 percent as the
target inflation rate. They also consider the
ideal gross domestic product growth rate to be between 2 percent and 3 percent. They must try to balance these three goals when setting
interest rates. The Fed encourages Congress to consider all three goals when setting tax rates or spending levels.
Three Components of the Natural Rate of Unemployment
Even in a healthy economy, there is some level of unemployment for three reasons:
- Frictional Unemployment – Some workers are in between jobs. Examples are new graduates looking for their first job. Others are workers who move to a new town without lining up another position. Some people quit abruptly, knowing they'll get a better job shortly. Still, others might decide to leave the workforce for personal reasons such as retirement, pregnancy, or sickness. They drop out of the labor force. When they return and start looking again, the BEA counts them as unemployed.
- Structural Unemployment – As the economy evolves, there is an unavoidable mismatch between workers' job skills and employers' needs. It happens when workers are displaced by technology, as when robots take over manufacturing jobs. It also occurs when factories move to cheaper locations. That's what happened after the North American Free Trade Agreement was signed. When baby boomers reached their 30s and had fewer children, there was less need for daycare workers. Structural unemployment remains until workers receive new training.
- Surplus Unemployment – This occurs whenever the government intervenes with minimum wage laws or wage/price controls. It can also happen with unions. Why? Employers must pay the mandated wage while keeping within their payroll budget. The only way to do this is to let some workers go. It's the consequence of an unfunded mandate.