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A newsletter featuring an essay on economic policy issues of regional or national interest.

Last Updated: 05/19/15

Chicago Fed Letter

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No. 339

Sin Taxes: The Sobering Fiscal Reality

Richard H. Mattoon and Sarah Wetmore

On April 2, 2015, the Federal Reserve Bank of Chicago and the Civic Federation held a forum to examine the use and efficacy of so-called sin taxes (e.g., taxes on alcohol, tobacco and gambling) levied by state and local governments.

No. 338

Changing Labor Force Composition and the Natural Rate of Unemployment

Daniel Aaronson, Luojia Hu, Arian Seifoddini and Daniel G. Sullivan

This article discusses why changes in the composition of the labor force may have lowered the natural (or trend) rate of unemployment—the unemployment rate that would prevail in an economy making full use of its productive resources—to 5 percent or less. A lower natural rate may help explain why wage inflation and price inflation remain low despite actual unemployment recently reaching 5.5 percent—a figure only slightly above prominent estimates of the natural rate, such as that of the Congressional Budget Office (CBO). Demographic and other changes should continue to lower the natural rate for at least the remainder of the decade.