4.7: Frictional Unemployment II

Frictional unemployment is a feature of any dynamic labor market and often reflects normal labor market turnover.

Frictional unemployment occurs when individuals are temporarily without work and are looking for a job, or while entering the labor force for the first time, or while reentering the labor force after a break. This can result from personal circumstances, geographic movement, or life-stage changes. Importantly, it does not imply a lack of job opportunities, but rather a time lag in the job-matching process.

For example, individuals may leave jobs to move with a spouse or partner, pursue a different career, or improve their work-life balance. The time spent looking for a new position contributes to frictional unemployment.

Graduates or others entering the labor market for the first time often need time to find suitable employment. They need time to search for suitable job openings, apply for jobs, and prepare for interviews.

People sometimes take a break for reasons such as caregiving or health-related issues. When such people return to the workforce after a break, they typically experience a period of job search despite having prior experience.

Since instances like reentering the labor force after a break, relocating, or entering the labor force for the first time are common and occur continuously in any economy, frictional unemployment remains a persistent and normal aspect of labor market activity

The movement of people to a new location may cause frictional unemployment. For example, Alex’s wife is promoted and transferred to another city, so he quits his job and moves with her. He needs time to search for available positions, submit job applications, and attend interviews. During this transition, Alex is considered unemployed.

Frictional unemployment also arises when people enter the labor force for the first time. For instance, a recent graduate, Emma, is actively seeking her first job. Until she finds employment, she is considered unemployed.

Frictional unemployment can also occur when people re-enter the labor force after a break. For example, Paige takes a career break to care for her young child. After a few years, she decides to return to work and starts looking for a job. Paige is unemployed during this period of job searching.

Frictional unemployment is typical in a dynamic labor market, as people spend time seeking work when they change jobs, enter the labor force, or re-enter it after a break.

As frictional unemployment is limited to short periods and is largely unavoidable, it is a prominent part of the natural rate of unemployment in the economy.