Frictional unemployment occurs when workers are unemployed between jobs or beginning their search for a job after entering the workforce.
Economists estimate that the full employment rate is between 94 and 96 percent (meaning the unemployment rate is from 4 to 6 percent). Some unemployment is inevitable – even healthy. An unemployed person must meet three criteria: 1) not have a job, 2) be willing to work, and 3) demonstrate that he or she is actively looking for employment by performing at least one job search task within the last four weeks.
Economists separate unemployment into three categories: frictional, structural, and cyclical. Frictional unemployment occurs when market inefficiencies prevent people from identifying and starting a job as soon as they want one. The process of applying, interviewing, and accepting a job takes time. Structural unemployment results when economic progress may leave some workers behind. Jobs may be available in areas where workers are unwilling to move. Finally, cyclical unemployment is caused by changing labor demands resulting from business cycles. The full employment rate includes frictional unemployment and structural unemployment but excludes cyclical unemployment.
Frictional unemployment is normally short-term and transitional. Workers change jobs. People enter and reenter the workforce, such as students seeking a job following graduation, or mothers reentering the workforce. It takes time to match potential employees and employers. The applicant must search for a job, apply, and probably interview for a job. Employers may want to consider many applicants. This is a period of frictional unemployment.
Unlike structural and cyclical unemployment, frictional unemployment does not harm the economy. In fact, frictional unemployment is healthy because it normally results from people seeking better jobs. Most of the time frictional unemployment is voluntary, so it is just a natural progression of people choosing where they want to work. Frictional unemployment normally increases following a recession because confidence in the economy increases people’s willingness to quit a job in search of a better one. Conversely, people may be hesitant to leave a job during a recession, fearing they will not find one to replace it. Frictional unemployment can be reduced by decreasing the time it takes for job seekers to find a job. Job placement companies such as Monster and CareerBuilder have improved the efficiency of identifying potential jobs.