Frictional Unemployment
What is Frictional Unemployment?
Frictional unemployment is short-term unemployment that occurs when people are between jobs or looking for their first job.
Frictional unemployment is a natural part of the job search process and is typically short-lived. It occurs when workers voluntarily leave their jobs to find better ones or when new entrants to the labor force are seeking employment. This type of unemployment is generally considered unavoidable and not a major concern for policymakers.
Frictional Unemployment: a worked example
Maya quits a retail management job in March to search for a better paid role and starts a new one in June. Through those months she has no job, is available for work and applies every week, so each monthly survey counts her as unemployed even though she left voluntarily and the economy is strong. If 900 people in a 30,000 person labor force are between jobs in the same way, they add 900 / 30,000 = 3 percentage points to the measured unemployment rate.
The mistake students make with frictional unemployment
Students assume that because frictional unemployment is voluntary and brief, those workers are not counted in the unemployment rate. They are counted: anyone without a job who is available for work and has actively looked for work in the past four weeks is officially unemployed, so frictional unemployment raises the measured rate and is one of the two components of the natural rate of unemployment.
Frictional Unemployment questions
Is frictional unemployment bad for the economy?
Frictional unemployment is not considered harmful, because it reflects workers and employers taking time to find a good match rather than a shortage of jobs. Economists include it in the natural rate of unemployment, so some of it exists even in a healthy economy at full employment.
What is the difference between frictional and structural unemployment?
Frictional unemployment is short-term joblessness while a qualified worker searches for or moves between jobs, while structural unemployment is longer-term joblessness caused by a mismatch between a worker's skills or location and the jobs that exist. A cashier who quit to find a better paying cashier job nearby is frictionally unemployed; a cashier whose position was eliminated by self-checkout machines is structurally unemployed.
Does frictional unemployment count in the unemployment rate?
Frictional unemployment does count in the official unemployment rate, because a person between jobs who is available for work and actively searching meets the definition of unemployed. It also counts toward the natural rate of unemployment, along with structural unemployment.
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