On page 494, when discussing the natural rate of unemployment Mankiw states that the NRU is caculated by dividing job separation/job separation + job finding. See below:
"The NRU can be viewed as the rate of unemployment the economy gravitates to, given the number of people losing jobs over a period and the number finding work over that same period. Unemployment is a dynamic process. At any period of time, there are people losing jobs (called job separation) and people finding jobs. Suppose that every month, the rate at which people lose jobs, denoted by the Greek letter $\alpha$, is 4.9 per cent, and the rate at which people find jobs denoted by the Greek letter $\psi$, is 65 per cent. The NRU is found by taking the job separation rate and dividing this by the sum of the job finding rate and the job separation rate:"
What are these two measures ratios of? My gut feeling is:
- Separation = #new redundancies/total labour force
- Job finding = #people entering employment/total labour force or perhaps #newly filled vacancies / total labour force
BUT In the example above from Mankiw, the job finding rate is 65%. This would seem to be close to a typical value for the employment rate (employed persons/population over 15yrs).
So to repeat my question, how do we define these two rates? Is "job finding" a synonym for employment rate? Any help much appreciated.