Types of Unemployment: Official Terms for Your “Work Hiatus”

types of unemploymentAs anyone who has been out of work can confirm, being unemployed is not fun. Between the lack of money and feeling like you’re not contributing to society, it can be a downright depressing situation. And let’s not forget about the seemingly never-ending cavalcade of interviews, trips to the copy store to get resumes printed out, and getting your suit dry-cleaned. It’s a stressful part of adult life that most of us must deal with at least once in our lives, but it almost always turns out with a happy ending, so if you’re facing this situation now, keep a positive attitude.

Today we are discussing the various types of unemployment. Most people probably just think that either you’re working, or you’re not, but there are several specific unemployment situations, and because this is an economic issue, it is analyzed and categorized every which way. If you’re currently unemployed, then turn off Judge Judy, sit back, and learn all about your unfortunate (but temporary) situation. If you’re planning on making the most of  your professional hiatus, and would like to change careers completely, this article on changing careers at 40, and this course on redesigning your career will help you find a new job you love, no matter what your age.

More on Unemployment

Let’s begin our discussion with a bit of info on the concept of unemployment. It is an economic term that refers to anyone that is without work, but that is also actively seeking a new job. It is a major indicator of how well or poorly an economy is doing, with unemployment rising in tougher times, like recessions, depressions, and downturns, and becoming lower in times of recovery and prosperity. The unemployment rate is the percentage of unemployed people among the labor force, and in the U.S., this rate is currently about 6.3%. This is an improvement over the 10% rate that existed during the recent recession of 2007-2009. If you’re currently out of work, or still have a job that you hate, and would like to reinvent yourself as an engineer, this introductory course on engineering will let you know if this career is right for you, and if so, how to get started.

Because unemployment is so closely tied in with economics, you can rest assured that the economists of the world would deem it necessary to break it down into as many different categories as possible. Luckily for us laymen and women, there aren’t too many of these types of unemployment, nor are they terribly complicated. There are essentially three major types (frictional, cyclical, and structural), with a few more minor ones thrown in for good measure.

Types of Unemployment

The first type of unemployment is not one of the major three types, but rather is a very broad way to categorize any type of job loss. These types of unemployment should be pretty easy to figure out. The voluntary type is when a worker chooses to leave a job to look for a new one. The involuntary type of unemployment is when the worker has no say in leaving the job, being either laid off or fired. In the world of economics, involuntary unemployment is the larger problem, because in situations of voluntary unemployment, it’s assumed that the worker is maximizing their utility, and working at a job that best suits them and their abilities.

  • Frictional Unemployment

The first major type of unemployment we will discuss today, frictional unemployment occurs when someone is searching for or transitioning to a new career, and is quite prevalent in the work force. It is mostly a voluntary type of unemployment that occurs when workers and their jobs don’t match. The conditions that may cause a worker to switch jobs may be related to skills, pay, work time, location, personal taste, or many other factors. Frictional unemployment comes about as a result from a worker who feels their work is not a match for their current job, taking into consideration the time and effort that finding a new job will take. Some sources of frictional unemployment include: recent graduates entering the workforce, parents re-entering the workforce after raising kids, people moving to a new city, and those that are fired, or want to change careers. If you happen to be a mom who wants to get back to the grind, this course on career re-launch for moms will help you plan your successful professional comeback.

  • Cyclical Unemployment

Like its name suggests, this type of unemployment is dictated by the various cycles that the economy goes through. It is never static, and has good times and rough patches, and the unemployment that takes place during the rough patches is referred to as cyclical. Cyclical unemployment is said to go up during bad times, and down in the good, even disappearing in especially prosperous times. As a result, when economists look at this type of unemployment, they prefer not to focus on the cyclical unemployment itself, but rather the root causes of the economic downturn, which is directly related to this type of job loss. Put more technically, cyclical unemployment is the result of insufficient aggregate demand in the economy, which means less jobs are needed.

  • Structural Unemployment 

Perhaps the most problematic of the unemployment types, structural unemployment, simply put, occurs when workers’ skills don’t quite match up to employers’ needs. Its name refers to the structural problems found within an economy, but also deals with the inefficiencies found in labor markets. Besides having workers whose skills are mismatched with employers’ needs, another way to look at structural unemployment is that sometimes labor markets have more workers than there are jobs available, but the wages don’t decrease to bring the markets into equilibrium. Two major reasons for structural unemployment include: changes in technology, for example, the fact that computers have put workers in now-obsolete lower-tech industries out of work, and changes in tastes, like when a product is no longer fashionable or desired by the general public. The reasons this type of unemployment is viewed as the most problematic are that it tends to be long-term, and the retraining of new workers tends to be difficult and expensive. Would you like to make a career out of the art that you’re passionate about and actually good at? This course on how to launch you career as an artist will help you conquer your fears and make some real money.

An economic term that relates to both structural and frictional unemployment rates is the natural, or structural, unemployment rate. Developed in the 1960s, this hypothetical concept represents the future unemployment rate, assuming the present economy continues to expand and be efficient, and labor and resource markets are at an equilibrium.

  • Seasonal Unemployment

Our final form of unemployment, the seasonal type, should be pretty easy to figure out: it’s when changes in the weather of the seasons cause certain industries and jobs to be unnecessary. It could be lumped into structural unemployment because some workers skills aren’t needed by employers in certain labor markets at specific times of the year. Though seen as a part of the worst kind of unemployment, seasonal unemployment is seen as not as problematic as that type because the demand for these jobs is gone only temporarily, and the pattern is very predictable. Examples of seasonal unemployment include lifeguards that work only during the Summer, certain tax jobs that are needed just in the busy season, and some retail positions during the holidays. If you’re in the sales world, and would like to kick your career into high gear, this course on taking charge of your sales career will help you create a well thought out Sales Execution Plan.

You might have also heard of “regional unemployment.” A type of structural unemployment, regional unemployment affects the economies of specific regions. Examples include industries that are obsolete, or no longer deemed necessary for whatever reason, such as shipbuilding towns, and coal mining communities.

Hopefully you don’t fit into any of these categories and are gainfully employed, but if you do happen to be out of work at the moment, you can now entertain your friends by telling them exactly what type of unemployment you’re experiencing. Don’t look at unemployment as a time to feel sorry for yourself, but rather as a time to reinvent yourself, and to wipe the slate clean. This course on improving your work situation will show you how to make the most of your free time (or current crappy job), and find your perfect career, and this article on taking advantage of social networking will teach you how to make professional connections online rather than wasting your time.