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Types of Unemployment

Economics (Year 11) - Unemployment

Carys Brown

Cyclical Unemployment

Cyclical unemployment refers to the business cycle. During a trough, when Australia's output is below the GDP target, unemployment rates will be high. Those who are unemployed during periods of low economic growth are said to be experiencing cyclical unemployment, meaning that during periods of high economic output, or a boom, they are more likely to find a job.

Frictional Unemployment

Frictional unemployment refers to the period of unemployment people experience when switching between jobs. This is not a major concern for economists as it is usually short-term and is a sign of confidence in employees to switch jobs and companies. Millennials are coined the 'job-hopping generation' with over 60% stating that they are 'open to new job opportunities.

Seasonal Unemployment

Seasonal unemployment occurs with jobs that are popular during a particular season. For example, a summer water park will only employ people during the summer months that it is open for. Therefore, during the winter months, employees are considered seasonally unemployed.

Structural Unemployment

When skills are lost or no longer in demand, it can cause a structural shift in the economy. For instance, before Australia become a nation based primarily on the mining sector, we were considered an agricultural society. However, farming skills are less in demand and therefore those unable to find a job in that sector, are considered structurally unemployed. Another example of this included skills being replaced with growing technological advancements.

NAIRU (Non-accelerating inflation rate of unemployment)

With over-full employment, wages will begin to rise -- there will be shortages of people with particular skills. So, as unemployment falls below the natural rate, wage inflation picks up, and the economy is clearly below the NAIRU rate.

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