KEY POINTS[ edit ]

Structural unemployment focuses on the structural problems within an economy and

inefficiencies in labor markets.
Frictional unemployment is the time period between jobs when a worker is searchi
ng for or transitioning from one job to another.
Cyclical unemployment is a type of unemployment that occurs when there is not en
ough aggregate demand in the economy to provide jobs for everyone who wants to w
ork.
Classical unemployment occurs when real wages for a jobs are set above the marke
ting clearing level.
The natural unemployment rate represents the hypothetical unemployment rate that
is consistent with aggregate production being at a long-run level.
Source: Boundless. Types of Unemployment: Frictional, Structural, Cyclical. Boundl
ess Economics. Boundless, 01 Jul. 2015. Retrieved 08 Jul. 2015 from https://www.
boundless.com/economics/textbooks/boundless-economics-textbook/unemployment-22/i
ntroduction-to-unemployment-102/types-of-unemployment-frictional-structural-cycl
ical-390-12487/
Unemployment
In economics, unemployment occurs when people are without work while actively se
arching for employment . The unemployment rate is a percentage, and calculated b
y dividing the number of unemployed individuals by the number of all currently e
mployed individuals in the labor force. The causes, consequences, and solutions
vary based on the specific type of unemployment that is present within a country
.

Source: Boundless. Types of Unemployment: Frictional, Structural, Cyclical. Boundl

ess Economics. Boundless, 01 Jul. 2015. Retrieved 08 Jul. 2015 from https://www.
boundless.com/economics/textbooks/boundless-economics-textbook/unemployment-22/i
ntroduction-to-unemployment-102/types-of-unemployment-frictional-structural-cycl
ical-390-12487/
Types of Unemployment
There are three major types of unemployment including cyclical, frictional, and
structural. Let's take a look at each one of them through the eyes of workers in
the town of Ceelo. As a matter of fact, I'd like to introduce you to a few of t
hem and then find out what type of unemployment they're experiencing.
Cindy just graduated from college, and she's looking for work by scanning job si
tes, reading newspaper listings and attending job fairs. Good for you, Cindy. Ci
ndy's dad, Matt, is a manufacturing worker in Ceelo who loves to pull levers and
wear hard hats. Matt's Uncle Fred works as a temporary Santa Claus each holiday
season; in particular, he loves to work at commodities trading firms on Wall St
reet. Fred's brother Frohm is a high school gym teacher who is desperately tryin
g to teach kickboxing to the school's guinea pigs with the help of students. He
was hired as a second gym teacher last year.
Okay, so this is the town of Ceelo, and these are the workers we're talking abou
t. Now, let's talk about the economy.
Cyclical Unemployment
Over time, the economy experiences many ups and downs. That's what we call cycli
cal unemployment because it goes in cycles. Cyclical unemployment occurs because
of these cycles. When the economy enters a recession, many of the jobs lost are
considered cyclical unemployment.

For example, during the Great Depression, the unemployment rate surged as high a
s 25%. That means one out of four people were willing and able to work, but coul
d not find work! Most of this unemployment was considered cyclical unemployment.
Eventually, unemployment came down again. As you can see, at least part of unem
ployment can be explained by looking at the cycles, or the ups and downs of the
economy.
Frictional Unemployment
Frictional unemployment occurs because of the normal turnover in the labor marke
t and the time it takes for workers to find new jobs. Throughout the course of t
he year in the labor market, some workers change jobs. When they do, it takes ti
me to match up potential employees with new employers. Even if there are enough
workers to satisfy every job opening, it takes time for workers to learn about t
hese new job opportunities, and for them to be considered, interviewed and hired
.
When Cindy graduates from college, she begins looking for work. Let's say it tak
es her four months to land a new job. During this time, she is frictionally unem
ployed.
Structural Unemployment
Let's talk about structural unemployment occurs because of an absence of demand
for a certain type of worker. This typically happens when there are mismatches b
etween the skills employers want and the skills workers have. Major advances in
technology, as well as finding lower costs of labor overseas, lead to this type
of unemployment.
When workers lose jobs because their skills are obsolete or because their jobs a
re transferred to other countries, they are structurally unemployed. It's struct
ural unemployment because the structure of the economy has changed, not because
of the regular ups and downs of it.
For example, Matt loses his job because the manufacturing company he worked for
in Ceelo moves overseas, and some of the factory workers left at home are not ne
eded because of new high-tech gear that was recently installed. So, Matt becomes
structurally unemployed. Most of the new jobs require a college degree or new s
kills, so Matt decides to go back to school. It's a very common example of what'
s happened in the economy, especially during challenging times.
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