frictional unemployment

Even in a roaring economy where there are plenty of jobs to go around, there is always some unemployment — simply because matching the right person to the right job takes time. A new graduate spends two months choosing between offers. A worker quits a bad boss and looks for something better. A family moves to a new city and the breadwinner job-hunts for a few weeks. None of these people are unemployed because there is no work; they are between jobs, in transit. That short, ordinary, search-driven gap is frictional unemployment.

More precisely, frictional unemployment is the unemployment that arises from the normal time it takes for workers and jobs to find each other in a constantly churning economy. Jobs are always being created and destroyed; people are always entering the labour force, leaving it, quitting, and being hired. Because information is imperfect and search takes effort, there is always a pool of people in the middle of that process at any moment. It is typically short-lived for each individual — a matter of weeks or a few months — and is generally considered healthy, even beneficial, because it reflects people seeking better matches rather than a broken economy.

Frictional unemployment can never be driven to zero, and policymakers do not try to. A bit of it is the sign of a flexible, dynamic labour market where people are free to move toward jobs that suit them better. Policy can lower it — through better job-matching services, online job boards, and clearer information — but trying to eliminate it would mean forcing people to take the first job offered, which wastes talent. It is one of the building blocks of the natural rate of unemployment, the baseline that remains even when the economy is at full strength.