What Is Frictional Unemployment?

Frictional unemployment is a type of unemployment that occurs when workers are looking for jobs but are between jobs. This type of unemployment is inevitable in any economy; it arises from the natural process of workers and jobs coming together in the job market. As people change jobs, search for new jobs, move to new areas, or take some time off before job-seeking, they experience frictional unemployment.

Examples of Frictional Unemployment

Frictional unemployment could occur for a new college graduate who is searching for their first job. After graduating, this individual must look for an entry-level job while also competing for the same position with peers from other schools. Another example of frictional unemployment would be a professional who is looking for a new job after leaving an employer. This person may need to wait for the right job opening or even take some time to refresh their skills in order to be more competitive in the job market.

Why Is Frictional Unemployment Important?

Frictional unemployment is important to understand because it can affect the total amount of unemployment in an economy. Moreover, when more people are unemployed, the rate of economic growth can fall due to a lack of consumer spending and investment. Even before a complete recession, an increase in frictional unemployment can lead to a drop in economic activity, which often results in fewer job opportunities and more layoffs.

How Can Frictional Unemployment Be Reduced?

Reducing frictional unemployment can be a challenge, however, there are a few things that can be done to help. One way is to create more programs or resources to help individuals transition from one job to the next. This can include programs that help individuals update their skills, or create job-searching resources specifically tailored to the needs of college graduates. Additionally, providing tax credits or subsidies to employers that hire unemployed individuals can also help increase job opportunities for individuals who are unemployed due to frictional unemployment.

Frictional unemployment is an important concept to understand in the job market and economy. It occurs when individuals are between jobs, and can potentially lead to an increase in total unemployment. By understanding the concept and providing resources to help individuals transition from one job to the next, frictional unemployment can be reduced.