4 Types Of Unemployment

First, please
note that economics texts sometimes refer to only three types of unemployment.   The fourth,
seasonal unemployment, is sometimes omitted.  When we are using a four-type typology, we say
that the types of unemployment are structural, frictional, cyclical, and seasonal.

Frictional unemployment is a kind of unemployment that occurs when people are between
jobs or are looking for their first jobs.  It is a kind of unemployment that occurs when the
economy is trying to match people and jobs correctly.  So, if you get fired for poor work, if
you quit because you dislike your job, or if you are just looking for your first job, you are
frictionally unemployed.

Seasonal unemployment occurs when people are not
working because their jobs only exist at some times of the year.  Agricultural and construction
workers are examples of this type of unemployment.

Structural unemployment
occurs when a given set of skills is no longer needed in a given economy.  For example, when
automobiles became prevalent in the United States, many people who worked with horses became
structurally unemployed.  In the US today, many people who worked in manufacturing are now
structurally unemployed.

Finally, there is cyclical unemployment, which
economists say is the worst kind.  In this kind of unemployment, people are out of work because
the economy has slowed and there is no demand for whatever the workers make.  This sort of
unemployment occurs during recessions.

Some textbooks list four kinds of
unemployment while others list three.  For those textbooks that list four, the types are
structural, frictional, cyclical, and seasonal.  The four types are different in that they are
caused by different things.  Let us look at each of the four in turn.

Structural unemployment is caused by a mismatch between a persons skills and the jobs
that are available.  If a persons skills are no longer needed in an economy, that person is
structurally unemployed.  The classic example of this is a person whose job has been taken over
by a machine or has been sent to a foreign country where wages are lower.

Frictional unemployment is the sort that happens when people are looking for the ideal
job.  A person is frictionally unemployed if they have been fired for being bad at their job. 
They are looking for a job they can do well.  A person is frictionally unemployed if they have
quit their job to look for one they like better.  They are also frictionally unemployed if they
are looking for their first job.

Cyclical unemployment is the sort that is
caused by bad economic times.  Here, a person is good at their job and their job would be needed
in our economy except for the fact that times are bad.  This would be someone like an auto
worker who is laid off because the company is not selling enough cars. 

Seasonal unemployment happens when a persons job is only available at certain times of
year.  Agriculture and construction are classic examples of these.  These are jobs that can
typically be done only at a certain time of year.