The Economy & the Fed

Types of Unemployment

Economists sort unemployment by its cause. Frictional unemployment is the short gap while people move between jobs or start their first one, and it exists even in a strong economy. Structural unemployment comes from a mismatch between workers’ skills or locations and the jobs on offer, such as when technology replaces a trade. Cyclical unemployment rises in recessions and falls in expansions, as demand for workers moves with the business cycle. Seasonal unemployment follows the calendar, like ski instructors in summer. “Full employment” does not mean zero unemployment, only that cyclical unemployment is gone.

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