Federal Reserve policy makers say full employment means a long-term jobless rate between 5 percent and 5.3 percent. Some of the most influential economists say they’re wrong. Bondholders “must worry that if the natural unemployment rate is up to 7 percent, then there’s the danger that the Fed will keep piling on more stimulus money as if they didn’t have to worry” about joblessness, Phelps, 76, a professor at Columbia University in New York, said in an interview.  Joblessness has stalled above 9 percent since May 2009. Maki 45, said in an interview from his New York office, that the natural rate -- the level that neither accelerates nor decelerates inflation -- will remain high because there’s a mismatch between available jobs and the skills of the unemployed. People whose homes are worth less than their mortgages also may be reluctant to move for work, and the extension of unemployment benefits deters some people from accepting employment with lower pay because a portion of their lost income has been replaced. 

“If you knew for sure that the natural rate was 5 percent, then it might make sense for the unemployment rate to hit 7 or 7.5 percent before you start tightening at all. But it can become a very risky strategy when the natural rate has risen, because you could be sitting at a zero percent Fed funds rate at full employment and not realize it,” said Maki.  Central bankers may be loathe to keep raising their estimates because it’s politically unpopular to say more Americans should be out of work to create equilibrium in the economy.  For the central bank to increase its benchmark rate to a “neutral” level of at least 4 percent a year ahead of the economy’s return to potential, possibly as soon as mid-2013, the Fed would need to alternate increases of 25 basis points and 50 basis points at each meeting between January 2011 and June 2012, “unless it starts sooner,” Deutsche Bank economists said.