What is Frictional Unemployment?
Frictional unemployment refers to the portion of the unemployment rate that results from labor market turnovers. This unemployment is ongoing and includes job transitions and communication lags between employers and potential employees, people entering and exiting the labor force and from the constant creation and destruction of jobs.
How Does Frictional Unemployment Work?
Frictional unemployment can be illustrated by someone who leaves their current job to look for another. Until they successfully find and begin another job, they are temporarily unemployed.
Another example would be a recent college grad who suddenly becomes available in the job market, but has yet to find his first job.
Why Does Frictional Unemployment Matter?
Since frictional unemployment results from temporary or incidental factors, it is a portion of the economy.which bears less importance as an indicator of the health of the