ECON 102 Lecture Notes - Lecture 8: Frictional Unemployment, Business Cycle
Document Summary
We would not expect frictional unemployment to ever be zero. We probably would not want frictional unemployment to be zero. Job switches allow people to seek more productive and satisfying work, improving personal as well as social welfare. Structural unemployment due to a fundamental change in the job market that destroys the jobs people had. For example, automation of an assembly line with robots might permanently eliminate some assembly line workers" jobs. We would hope that structurally unemployed people would eventually find new jobs. People may quit their current jobs to look for something better. It is hard to imagine a situation in which structural unemployment would be voluntary. This category is the main focus of macroeconomic analysis. It arises when firms are not selling enough output to keep all their employees working: unemployment rate as a lagging indicator of the business cycle. Note that cyclical unemployment (and the overall unemployment rate) is a "lagging indicator" of the business cycle.
