Types of Unemployment

Unemployment comes in three main types, each caused by different factors. First, there’s frictional unemployment. This happens when people are temporarily out of work because they’re switching jobs or just starting their careers. For example, if you just graduated and are looking for your first job, or if someone quits their job to find something better, they’re experiencing frictional unemployment. It’s usually a short-term thing and part of the normal job search process.

Next up is structural unemployment. This one occurs when there’s a mismatch between the skills people have and the jobs available. Imagine a factory that used to make VHS tapes but now needs workers skilled in digital technology. If the former workers can’t adapt, they face structural unemployment because their skills don’t match what’s needed in today’s job market.

Lastly, there’s cyclical unemployment, which happens when the economy slows down. During a recession, for example, companies might cut back on hiring or lay off workers because there’s less demand for their products or services. So, cyclical unemployment is tied to the ups and downs of the economy, and it tends to go up when the economy is struggling.

In short, frictional is about moving between jobs, structural is about skill mismatches, and cyclical is about economic slowdowns. Each type has its own causes and solutions.