Unemployment can be frictional, structural, cyclical or seasonal, and each has a different cause.
Frictional unemployment happens when people are between jobs. A worker who has just left one job may take a few weeks to find the next. It is usually short and is always present.
Structural unemployment happens when the structure of the economy changes. An industry shrinks, perhaps because of new technology or foreign competition, and its workers lack the skills or location for the jobs that are growing. It can last a long time.
Cyclical unemployment happens when total demand falls, as in a recession. Firms sell less, so they need fewer workers.
Seasonal unemployment happens when demand for workers changes with the seasons. Examples are tourism workers in the off-season or farm workers after harvest.
- Frictional
- Between jobs; short-term.
- Structural
- Industry decline and skill mismatch; long-term.
- Cyclical
- Fall in total demand in a recession.
- Seasonal
- Demand for labour varies with the season.
Worked example: Naming the type
Identify the type of unemployment in each case.
- A graduate takes two months to choose between job offers: frictional.
- Bank tellers lose jobs as customers move to online banking: structural.
- Factory workers are laid off as orders fall during a recession: cyclical.
- Ski instructors have no work in summer: seasonal.
Watch out for this
Structural unemployment is caused by a recession.
A recession causes cyclical unemployment. Structural unemployment comes from long-term changes in industries and the skills they need.
Check your understanding
Printing workers lose their jobs as more people read news online. Which type of unemployment is this?
- Structural
- Cyclical
- Frictional