Frictional unemployment, structural unemployment, and cyclical unemployment are three different types of unemployment that occur in the economy.
Whether the economy is good or bad, there are always people transitioning between jobs. While these workers can be skilled and have no trouble getting a new job, the size of the labour market means that the cumulative weight of this “frictional” unemployment adds up. Thus, frictional unemployment occurs when people are temporarily unemployed because they are new to the labor market or because they are looking for better jobs. Hence, frictional unemployment is short-term on an individual basis, though constant on a systemic basis, and is standard even in healthy economies.
Meanwhile, when the workforce is not properly trained for jobs currently available, people face structural unemployment. Structural unemployment is caused by the obsolescence of workers’ skills due to technology or other factors that reduce the demand for their skills. Structural unemployment usually lasts longer than frictional unemployment, as workers who become unemployed for structural reasons are more likely to experience long-term unemployment (more than 12 months).
Finally, cyclical unemployment is workers who lose their jobs due to business cycle fluctuations — the normal up and down movements of the economy as it goes through ups and downs over time. Cyclical unemployment is associated with the loss of jobs due to a recession; it is a deviation from the “official unemployment rate”.
Cumulatively, government economists define full employment, or the so-called natural rate of unemployment (also called the non-accelerated rate of unemployment, or NAIRU), as a situation in which all unemployment is structural and frictional.
That’s a brief on three types of unemployment—let me know what further questions you have!
To learn more about economics, consider reading about the Economic Fluctuations Model, the Gains from Expanded Trade Model, and the Spending Allocation Model. Else, consider the other articles in my Economic List below.
