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What is Frictional Unemployment?

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Frictional Unemployment Isn’t Necessarily a Bad Thing

Frictional unemployment is a term used to describe the number of working-aged adults who are temporarily between jobs, often voluntarily, and are therefore technically unemployed. This group can include recent graduates, people in the process of moving to take a new job or even individuals who are in the middle of an active job search. It can also include new mothers who are temporarily out of the workforce for child-rearing purposes.

How Frictional Unemployment Differs From Other Types of Unemployment

People who are frictionally unemployed are typically in the midst of a job search and are not necessarily looking for just anything that comes along; rather, they are being particular about getting the right job in the right industry. Frictional unemployment is sometimes classified in economic circles as “voluntary unemployment,” but realistically, in most instances, a critical decision has been made to not work for a period of time. Frictionally unemployed people are typically equipped to handle this downtime because they have made the decision to go out and look for something better; whereas, structurally or cyclically unemployed people have been let go, many without warning, and have to cope with the emotional element of sudden job loss, as well as practical financial concerns.

Impact of Frictional Unemployment on Society

People who are frictionally unemployed remain counted among the ranks of the unemployed in the economic studies of a region’s employment statistics. The figures can be misleading, as frictional unemployment figures don’t necessarily indicate the health of any given job market. Additionally, economists actually see an upside to frictional unemployment, as it generally means that workers are looking for ways to move up into higher-earning positions.

Impact of Frictional Unemployment on Households

Any period of unemployment, whether planned and calculated, can have a negative impact on a family’s finances, sometimes leading to personal and familial stress. If you know a period of frictional unemployment is looming, such as taking off time to care for children, to conduct a job search or to move for a job in a new location, advanced planning can help reduce the potentially negative impact of this financial downtime.

  • Consult your household budget to determine how long you can conceivably be without your salary before you’re in financial distress.
  • Make a calculated, educated guess on how long you will be without a steady income. For example, if you’re taking off six months to be at home with a newborn, you’ll know you need six months of cash reserves to cover your lost salary.
  • Factor in whether you will be losing benefits, like health insurance, that will have to be temporarily paid out of pocket. For example, if you accept a new job, and benefits don’t kick in for three months, you’ll need to get COBRA insurance for three or four months to handle coverage gaps.
  • Plan for this downtime by cutting back and building up a nest egg that can cover your living expenses as well as emergencies.

What Can Reduce Frictional Unemployment?

Frictional unemployment can be reduced by proactive behaviors by both employers and job-seekers:

Job seekers: Find a new job before leaving an old one, or, if possible, reduce the time between when one job ends and another begins.

Employers: Start searching for a replacement immediately after someone gives you notice, and don't allow open job positions to go unfilled for extended periods of time.

When Frictional Unemployment Is Too Much

If you find that a period of frictional unemployment wreaks havoc on your family’s budget, consider the following options to keep you afloat:

  •  Look for consulting or freelance work while in-between jobs.
  •  Don’t leave one job without having another one lined up, if possible.
  •  Take temporary or part-time work while you search for something that’s in line with your professional objectives, just to keep money coming in.

Keep a positive attitude if you find yourself frictionally unemployed. Remind yourself it’s a temporary condition that has great potential to lead to bigger and better things.