Nairu (Non-Accelerating Inflation Rate of Unemployment)

The lowest rate of unemployment that does not lead to a jump in wages and inflation. It is a development of the “natural rate of unemployment”, a concept developed by Milton Friedman. This holds that a certain level of unemployment is inevitable, as workers switch jobs or take time to upgrade their skills. Trying to force unemployment below this level does nothing but stoke inflation. However, calculating the Nairu at any given moment is very tricky; it clearly varies over time. See also frictional unemployment, Phillips curve. For more detail, read our Schools Brief.