Frictional unemployment exists because it takes time for job seekers to find businesses who are looking to hire and vice versa (Littenberg & Tregarthen, 2009). Businesses post wanted ads on job search sites and unemployed workers use the sites to find employers who are looking for their skill set. The time it takes the two to find each other is frictional unemployment (Littenberg & Tregarthen, 2009). Frictional unemployment can be reduced by things such as job fairs, employment services, and active recruiting by the businesses; pretty much anything that makes it easier to match prospective employees to future employers would help frictional unemployment.
Structural unemployment occurs when an employer is looking to hire and a job seeker wants a job but the job seekers skills do not meet the needs of the employer (Littenberg & Tregarthen, 2009). Structural unemployment could be caused by advances in technology or because a certain type of job moves to a new region (Littenberg & Tregarthen, 2009). If a worker only knows how to work on a certain item and that item becomes outdated because of a new version or technology; then there is no demand for the skill (Littenberg & Tregarthen, 2009). The employee would have to become proficient in the technology or skill set in demand, in order to meet the needs of prospective employers in that field. This type of unemployment could also happen if the only basket weaving business in the state moved to another state. In order retain that job or get a new job the workers would have to either move to where their skill is needed or learn a new skill that is sought after in their area.
Both types of unemployment listed above are considered the natural rate of unemployment when the economy is operating at its potential (Littenberg & Tregarthen, 2009).
Cyclical unemployment follows the...