AL Econ F.7

Actually, there should be 4 kinds of umemployment - frictional, structural, seasonal and cyclical.

Frictional unemployment - arises because workers seeking jobs do not find them immediately; while looking for work they are counted as unemployed. Friction in this case refers to the incongruity between the demand for and supply of labor.

Structural unemployment - arises from an imbalance between the kinds of workers wanted by employers and the kinds of workers looking for jobs. The imbalances may be caused by inadequacy in skills, location, or personal characteristics. Technological developments, for example, necessitate new skills in many industries, leaving those workers who have outdated skills without a job. A plant in a declining industry may close down or move to another area, throwing out of work those employees who are unable or unwilling to move. Workers with inadequate education or training and young workers with little or no experience may be unable to get jobs because employers believe that these employees would not produce enough to be worth paying the legal minimum wage or the rate agreed on with the union.

Seasonal unemployment - occurs when industries have a slow season, such as construction and other outdoor work in winter. It also occurs at the end of the school year in June, when large numbers of students and graduates look for work.

Cyclical unemployment - results from a general lack of demand for labor. When the business cycle turns downward, demand for goods and services drops; consequently, workers are laid off.