Frictional unemployment is good or bad？

Frictional unemployment is usually a natural part of the economic system, so it is more likely to be seen as good。

If there were no frictional unemployment, people would be in the same job for the rest of their lives.。In extreme cases, this means taking the first job you can get and never moving.。But the first job may not be the best fit for your skills, ambitions or personality, and that city may not be the place you want to spend your entire career。

It may make sense to be unemployed for a while to find a more suitable job。Or you may have learned some minor skills while working for a company。After a failed promotion, it may be better to return to the job market。

Without frictional unemployment, the economy stagnates。Because people usually find work quickly, rather than being unemployed for long periods of time, many may end up in positions that are not suitable for them。Without the freedom to move to better jobs, a lot of talent is wasted and the economy usually underperforms its potential。

It also means that entrepreneurship will be drastically reduced。Since people cannot quit their jobs to start new businesses and there is no pool of labor that can hire new employees, there will be little innovation and little technological progress.。

For these reasons, a degree of frictional unemployment is good, and the unemployment rate target is never zero。Of course, partial frictional unemployment can have a negative impact - if people spend too much time looking for work, economic output will be lower than it should be.。

What are the types of unemployment?？

There are four basic types of unemployment:

Frictional unemployment occurs when a person leaves a position to find a better job, or when people outside the labor force start looking for a job。Suppose you quit your current job and take two weeks to start a new one。In this case, you are unemployed for two weeks of the year。

Structural unemployment occurs when the economy changes and gives some workers skills they no longer need。For example, when cars become the main mode of transportation, saddle manufacturers are no longer needed。People who make saddles lose their jobs due to structural changes in the economic system。

Seasonal unemployment is a situation in which people in seasonal jobs do not work during the off-season, usually including winter fruit pickers, off-season tourism workers, construction workers, and others whose jobs are highly dependent on a certain time of the year。

Cyclical unemployment stems from the business cycle。When the economy entered the recession phase, many businesses closed down and many ended up unemployed。Those workers who lose their jobs as a result of the recession are cyclical unemployed.。When the expansion phase of the business cycle begins, they should find work again。

What are the causes of frictional unemployment?？

Not all people without jobs are unemployed.。Full-time parents, college students, children, retirees, housewives, hospitalized patients and prisoners are all examples of people who are unemployed but not unemployed。

To be considered unemployed, a person must actively seek work and not be compensated, a definition that is crucial to understanding the causes of frictional unemployment。

Frictional unemployment almost always begins with voluntary action。A person may be unhappy with their job and decide to quit; maybe they moved to a new town; or maybe they just want a change of pace in their current hometown。Either way, they are frictionally unemployed when they are ready to start a new job, or when they are looking for better opportunities。

Another reason could be new entrants to the labor market。People 16 or older may start looking for their first job。As long as they're looking for a job, these job seekers face frictional unemployment。High school students who are not interested in work are not considered unemployed (because they are not in the labor force); similarly, people who have just graduated from college experience frictional unemployment when trying to find a place where they can make the most of their education。

Finally, re-entry into the labor market may lead to frictional unemployment。Maybe parents will take a few years off to raise their children。Once children grow up, they may want to go back to work, and the time between making a decision and receiving a paycheck is frictional unemployment。Similarly, people who have just gotten out of prison or who have recovered from a serious illness may start looking for work again, and these re-entrants to the labor market will cause some frictional unemployment when they return to the labor market。

At the same time, perhaps a man decides to take his career in a whole new direction。If they choose to take a year off from school to learn a new skill and do not look for a job during their studies, they are not unemployed during the training period。But as soon as they finished the program and started looking for work in a new field, they were frictionally unemployed。However, if the same situation is created because the old job is outdated, it is structural unemployment.。

How to Calculate Frictional Unemployment？

The best estimate of frictional unemployment comes from data provided by the U.S. Bureau of Labor Statistics (BLS), which is generated through household surveys and then uses statistical models to estimate the current employment status。

In Table A of its monthly employment report, the Bureau of Labor Statistics lists four categories of unemployment。

Unemployed people are usually not frictionally unemployed and are more likely to be unemployed due to economic conditions (cyclical unemployment) or business obsolescence (structural unemployment)。

Leavers are almost exclusively frictionally unemployed, who leave voluntarily but remain in the workforce。

Reentrants are a mixture of multiple types of unemployment, and those who voluntarily leave their jobs to complete training or college are frictionally unemployed; so are those who do not join the labour market due to non-economic factors (stay-at-home parents, release from prison, discharge, etc.)。One exception is the re-entry into the labour market of "discouraged workers" who have become so depressed by not being able to find work in a very bad economy that they no longer look for work at all。When they start looking for work again, they are still seen as cyclical unemployed。

New entrants are people who are looking for their first job。They may have just grown up and can start looking for a job, or they may have just finished school.。

To estimate frictional unemployment, you can combine three categories: leavers, re-entrants, and new entrants, and divide the total number in these categories by the total number of the workforce to arrive at the frictional unemployment rate。