Policy makers like to smooth fluctuations in unemployment around its natural rate. Doing so requires that one knows what the natural rate is. Why is locating the natural rate of unemployment difficult to do in practice?
The natural rate is the unemployment rate at which there is no tendency for inflation to rise or fall. This must be estimated by statistical means by carrying out a regression of the change in the inflation rate on the unempoloyment rate. The statistical technique makes for two difficulties. 1) all statistical estimates involve some uncertainty; 2) the method requires historical data so it can be miusleading if the natural rate has recently moved because of changes in the way the labor market functions.