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Frictional unemployment is a natural occurrence in all economies, encouraging people to find the best jobs and companies to find the best employees. It is beneficial and will never fully drop to zero, and can be prolonged by those seeking the ideal job. It is closely related to structural unemployment, where a mismatch between available employees and available jobs arises.
Frictional unemployment is a type of unemployment that occurs naturally in even the best-performing economies. In fact, this type of unemployment is often seen as beneficial to workers and the economy. The existence of frictional unemployment and the closely related structural employment mean that the unemployment rate in a nation will never fully drop to zero.
Whenever someone is in between jobs, this is considered frictional unemployment. Some common examples include graduates looking for work, craftsmen laid off between projects, and people who quit their jobs to move or look for a better job. These people are generally prepared for their short spells of unemployment and won’t be unemployed for long as long as the economy and job market are stable.
This type of unemployment is beneficial because it encourages people to look for the jobs they are best suited for, giving companies the ability to find the best employees. Without frictional unemployment, people would stay in the same jobs for life, creating a very static system that would tend to suppress innovation and make it difficult for companies to find new employees who can provide useful skills and ideas in the workplace.
The frictional unemployment rate can vary, depending on the time of year and economic circumstances. In college towns, for example, the rate is often very high in June, when students have just graduated and started looking for work. In rural areas, the rate may be higher in the winter months, when construction and agricultural jobs aren’t as readily available and people have wrapped up major projects that may require temporary work.
People may prolong periods of frictional unemployment by looking for the right or ideal job. People who can wait are often encouraged to do so so that they end up in a job that will offer opportunities for advancement and improvement, rather than a position they will leave as soon as they find a better opportunity.
Frictional unemployment may be closely related to structural unemployment, a situation characterized by a mismatch between available employees and available jobs. In structural unemployment, a surplus of a particular skill set or type of employee arises, and not all of these individuals can find work. One of the most famous examples of structural unemployment is the wave of highly skilled but unemployed tech professionals that appeared after the 1990s tech bubble.
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