Principles of Macroeconomics / Unit 5 MAC 0417 worked example, 60 to 90 seconds
Which Type of Unemployment?
The idea
Three types, and one question each. Is the person between jobs in a working economy, searching and likely to be matched soon? That is frictional. Do the skills or the location fail to match what employers want, so that searching longer would not solve it? That is structural. Did the job disappear because the whole economy contracted, and would it return if demand recovered? That is cyclical. The test that separates the last two is whether reviving demand would bring the job back.
In practice
Worked example: a welder laid off when a shipyard closed permanently, whose trade is no longer in demand locally, is structurally unemployed. A cashier laid off when a recession cut sales, whose employer plans to rehire when trade recovers, is cyclically unemployed. A programmer who quit to look for better work and is interviewing is frictionally unemployed.
Where people slip
The same person can be reclassified as time passes. A worker laid off in a recession is cyclically unemployed at first, and becomes structurally unemployed if the industry never recovers and the skills go stale. The categories describe the cause, not the person.
Your place on the trail
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