U-Star

U-star (u*) is the natural rate of unemployment: the jobless rate you would expect when the economy is running at a sustainable pace. Push unemployment well below it and employers compete fiercely for workers, wages climb, and inflation tends to follow. Let it rise well above and the economy has slack.

Like its cousin r*, the neutral interest rate, nobody can observe u* directly; it has to be estimated, and estimates move over time. Central bankers often frame the labour market as "tight" or "loose" relative to it.