The CBO estimated that the natural rate of unemployment was 6.8% in 1979 and 5.0% in 2001. If you examine Figure 7.10 on page 250 carefully, you can see that the natural rate remained relatively constant during the 1980s and then fell more rapidly during the 1990s.
a. Considering only the frictional component of the natural rate of unemployment, what might explain this change?
b. Productivity growth was slow during the 1980s. One theory about this slow growth was that innovations in computer technology were not increasing productivity in ways that were directly measurable. Productivity growth increased in the 1990s, and at the same time, the natural rate fell. Does this fact suggest anything about structural unemployment in the 1980s and 1990s?