The nairu is the natural rate of unemployment, the level of unemployment that arises from people changing jobs, minimum wage laws and trade unions.
Felix Salmon cheerfully tells us
As for the possibility of a higher Nairu, we’re so far away from there right now that for the time being such discussions are probably academic.
On the contrary, the nairu has risen right now – the US is not in a Keynesian recession where aggregate demand is less than aggregate supply, we are in an Atlas Shrugged recession where employers are punished for employing. If the current crisis in the USA was well described by Keynes, then core inflation would have fallen as unemployment rose. Instead core inflation has remained pretty much constant, indicating that any increase in employment that reduces the unemployment rate to below present high levels will result in accelerating inflation.
A substantial part of the Obama “stimulus†package was to make it more expensive for employers to lay off employees. Since employers, unlike politicians, regulators, and voters, tend to take a long term view, this of course makes them more apt to lay people off, and less apt to hire people. If you increase the cost to employers of people changing jobs, the nairu resulting from people changing jobs will increase.
Another part of the “stimulus†package was to privilege unions in various ways. Unionization directly raises the Nairu.
A large part of the “stimulus†package was to privilege big companies over small companies, the extreme case being “too big to failâ€Â Market concentration increases the nairu.
Rapidly rising unemployment without falling inflation indicates that this rising unemployment is directly caused by the “stimulus†and is likely to be permanent. Moving to a European style political and economic order means moving, permanently, to European levels of unemployment.