What Are The Three Kinds Of Unemployment?

In sorting out the structure of labor markets, economists identify three different kinds of unemployment: frictional, structural, and cyclical.Frictional unemployment arises because of the incessant movement of people between regions and jobs or through different stages of the life cycle. Even if n economy were at full employment, there would always be some turnover as students search for jobs when they graduate from school or parents reenter the labor force after having children. Because frictionally unemployed workers are often moving between jobs, or looking for better jobs, it is often thought that they are voluntarily unemployed.

Structural unemployment signifies a mismatch between the supply of and the demand for workers. Mismatches can occur because the demand for one kind of labor is rising while the demand for another kind is falling, and supplies do not quickly adjust. We often see structural imbalances across occupations or regions as certain sectors grow while others decline.

Cyclical unemployment exists when the overall demand for labor is low. As total spending and output fall, unemployment rises virtually everywhere. In the recession year 1982, the unemployment rate rose in 48 to the 50 states. This simultaneous rise in unemployment in many markets signalled that the increased unemployment was largely cyclical.