Frictional Unemployment

AAA

DEFINITION of 'Frictional Unemployment'

Unemployment that is always present in the economy, resulting from temporary transitions made by workers and employers or from workers and employers having inconsistent or incomplete information.

INVESTOPEDIA EXPLAINS 'Frictional Unemployment'

For example, a first-time job seeker may lack the resources or efficiency for finding the company that has the job that is available and suitable for him or her. As a result this person does not take other work, temporarily holding out for the better-paying job.

Another example of when frictional employment occurs is when a company abstains from hiring because it believes there are not enough qualified individuals available for the job, when in actuality there is.

RELATED TERMS
  1. Structural Unemployment

    A longer-lasting form of unemployment caused by fundamental shifts ...
  2. Non-Accelerating Inflation Rate ...

    The specific level of unemployment that exists in an economy ...
  3. Pink Slip Party

    A party that brings together professionals and recruiters who ...
  4. Full Employment

    A situation in which all available labor resources are being ...
  5. Natural Unemployment

    The lowest rate of unemployment that an economy can sustain over ...
  6. Cyclical Unemployment

    A factor of overall unemployment that relates to the cyclical ...
RELATED FAQS
  1. What is the difference between frictional unemployment and structural unemployment?

    Structural unemployment and frictional unemployment are two different types of unemployment that occur in an economy. Frictional ... Read Full Answer >>
  2. Is there a natural rate of cyclical unemployment?

    There is no natural rate of cyclical unemployment. The natural unemployment rate is a specific feature of the economy — it ... Read Full Answer >>
  3. What is the key difference between the participation rate and the unemployment rate?

    The participation rate and unemployment rate are economic metrics used to gauge the health of the U.S. job market. The key ... Read Full Answer >>
  4. How can minimum wages contribute to a market failure?

    The minimum wage acts like a price floor on labor, reducing the supply of jobs available to a level below the market-clearing ... Read Full Answer >>
  5. Do rising unemployment rates tend to increase or decrease investor sentiment and ...

    Rising unemployment rates tend to decrease investor sentiment and consumer confidence. Unemployment is one of the most important ... Read Full Answer >>
  6. Does raising the minimum wage increase inflation?

    There are conflicting views on whether raising the minimum wage increases inflation. Tied to this is the question of what ... Read Full Answer >>
Related Articles
  1. Economics

    Examining The Phillips Curve

    This model depicts an inverse relationship between unemployment and wage inflation, but is it accurate?
  2. Economics

    What You Need To Know About The Employment Report

    This widely watched indicator of economic well-being directly influences the market.
  3. Budgeting

    Are You Living Too Close To The Edge?

    If a missed paycheck will make your finances cave in, you must learn how to make proper supports.
  4. Economics

    Understanding Natural Unemployment

    Natural unemployment is often defined as the lowest rate of unemployment an economy will reach.
  5. Entrepreneurship

    How To Talk To Headhunters

    8 tips on forging a fruitful relationship with an executive recruiter.
  6. Economics

    Good Economic News The Cynics May Be Missing

    Headline data about the U.S. economy hasn’t been great, but the economy is actually stronger than it’s getting credit for.
  7. Credit & Loans

    The Best and Worst Countries to Find a Job

    Which countries have the lowest and highest unemployment rates? The answers might surprise you.
  8. Personal Finance

    8 Ways To Seriously Blow It With A Headhunter

    Job hunters, beware. These are the 8 things that blow your chances with headhunters. So pay attention to your behavior when you're being interviewed.
  9. Entrepreneurship

    7 Ways To Make Executive Recruiters Notice You

    Yes, you can go after executive recruiters – but take a sophisticated approach. Here's how.
  10. Entrepreneurship

    The Job Hunter's Guide To Headhunters

    Corporations often turn to these outside consultants to fill their executive vacancies. Here's what you need to know about how they work.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!