What Is Frictional Unemployment?

Frictional Unemployment Explained in Less Than 3 Minutes

Definition
Frictional unemployment refers to the people who are considered to be unemployed while between jobs.
Image shows a man in a suit and tie jumping from the roof of one office building to another. The first building says "Old Job" across it, and the second building says "New Job." Text reads: "What is frictional unemployment? Frictional unemployment is when workers are jobless and looking for work in a healthy economy–whether they leave voluntarily or are fired. Differentiated from other types of unemployment because it's part of normal labor turnover."
The Balance / Daniel Fishel. Photo:

The Balance / Daniel Fishel

Frictional unemployment is when workers are between jobs. This type of unemployment occurs naturally, as there are always workers who leave a job and are searching for their next one. As a result, frictional unemployment will always exist, even in a healthy economy.

Let’s take a closer look at what frictional unemployment means and how it works.

Definition and Examples of Frictional Unemployment

Frictional unemployment refers to the people who are considered to be unemployed while between jobs. When people leave one job for another, there sometimes is a temporary period in which they are unemployed.

Since there will always be workers searching for new jobs, there will always be frictional unemployment. Frictional unemployment and structural unemployment are the two types of unemployment that naturally occur. This “natural” type of unemployment is calculated as the natural rate of unemployment.

To estimate the unemployment rate, the U.S. Bureau of Labor Statistics (BLS) uses data on the employment status of the U.S. population from a monthly survey of approximately 60,000 households. A person must have no job and must actively be seeking a job to be considered unemployed. If they are not actively searching for a job, they are not considered part of the labor force and are not counted in the unemployment rate.

To be considered frictionally unemployed, a person must be between jobs and must not have lost their job for structural or cyclical reasons. For example, a worker who quits their job in anticipation of lining up another one or someone who has just entered the workforce after graduation would be considered frictionally unemployed.

Note

Structural and cyclical unemployment are the two other types of unemployment measured by the BLS.

How Does Frictional Unemployment Work?

A person is frictionally unemployed if they voluntarily leave or are fired from their job. New entrants into the workforce who are searching for their first job would also count as being frictionally unemployed.

Frictional unemployment is considered to be less problematic than other types of unemployment because it reflects the time it takes for workers to find jobs that suit them best. A function of a healthy economy is when workers move into jobs where they’re most productive.

Out of the three main types of unemployment measured by the BLS, frictional unemployment is temporary. Structural unemployment, which is when someone loses their job due to a mismatch in skills, lasts much longer as someone likely needs to learn new skills before finding a job. The other type of unemployment is cyclical unemployment, which can create more unemployment. Cyclical employment is not considered naturally occurring and is seen as a result of an economic recession.

What Is the Lowest Level of Unemployment the U.S. Economy Can Sustain?

The natural rate of unemployment measures unemployment that occurs outside of business cycle recessions. This comprises frictional, structural, and surplus unemployment. Since both frictional and structural unemployment occur naturally in a market, the lowest level of unemployment the U.S. economy can have—and sustain—depends on how low the rates for these two types of unemployment can go.

According to the Federal Reserve, “the lowest level of unemployment that the economy can sustain changes over time as the jobs market changes. …Even in good times, a healthy, dynamic economy will have at least some unemployment as workers switch jobs, and as new workers enter the labor market.”

In the graph below from the Federal Reserve Bank of St. Louis, the natural rate of unemployment in the U.S, which is represented as the noncyclical rate of unemployment, has fluctuated since the late 1960s. The highest rate of noncyclical unemployment between 1952 and 2022 was in 1978 when it reached 6.2%. It hit a low of 4.4% in 2022. The graph below shows that even when the overall unemployment rate is low, there will always be some level of unemployment due to frictional and structural unemployment since workers will continue to switch jobs and new workers will enter the labor market.

Key Takeaways

  • Frictional unemployment is a result of people being between jobs, regardless of whether they voluntarily left or were let go from their jobs.
  • Frictional unemployment is one type of unemployment that naturally occurs in an economy and will be present even in a healthy, growing economy.
  • Out of the three types of unemployment measured by the BLS, frictional unemployment lasts the shortest duration of time.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. U.S. Bureau of Labor Statistics. “Full Employment: An Assumption Within BLS Projections.”

  2. U.S. Bureau of Labor Statistics. “Labor Force Statistics From the Current Population Survey; Concepts and Definitions.

  3. Board of Governors of the Federal Reserve System. “What Is the Lowest Level of Unemployment That the U.S. Economy Can Sustain?

  4. Federal Reserve Bank of St. Louis. “Graph of Unemployment Rate vs. Noncyclical Rate of Unemployment.”

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