In the realm of pure macroeconomics, and without the influences of public pressure, central banks and governments tolerate higher unemployment rates as a way of keeping inflation under control. A tacit understanding holds that unemployment in the 5 to 6% range helps keep control on both wages and prices, thereby deterring both workers and manufacturers from greedy behaviour. Such thinking has led to a retreat from full employment policies.
The 1990s began as a time of unemployment and slow growth, and low or falling output and high unemployment are likely to characterize the global industrial economy through the beginning of the decade at least. Many leaders appear to read their electorate as being more concerned about the dangers of renewed inflation than about unemployment levels, and the drag that joblessness places on recovery.