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The NAIRU is defined as the rate of unemployment (U) at which expected inflation (I) = 0 (all other potential causes of inflation/deflation ignored). If the method of computing unemployment changed so that unemployment was expressed in units U*, the NAIRU would have the same meaning, but U* would not = U.


this might help. Nairu and the natural rate are not the same thing.


And no the UR doesn't adjust for structural unemployment etc...


Arandomwalk: thanks for the link. It clarifies how economists think about the "natural rate". I'm not sure what you mean by "UR does't adjust for structural unemployment"; are you talking about U6? My understanding is the 9-10% the media reports excludes workers who don't want to work, who give up looking for work, etc.


Natural rate of unemployment corresponds to what you would expect to see if market's were frictionless, i.e. that people who are in the job market would be only unemployed voluntarily (e.g. searching for the right job).

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