5 As a result, estimates of the gap between actual and potential output often narrow over time, partly through higher actual output but also through lower estimates of potential. For example, figure 2 shows that the Congressional Budget Office has made a series of downward revisions to its estimates of potential output in recent years.
6 This supply-side damage has typically appeared both in the labor market and in the capital stock. 7 Long spells of unemployment cause skills to atrophy and make it more difficult for workers to find new jobs, raising the natural rate of unemployment for those who do remain in the labor force and causing others to throw in the towel and drop out.