Financial term of the day, Friday 28th of November 2014:

Frictional unemployment

Sometimes called transitional, this occurs when unemployed workers are temporarily without a paid occupation while moving from one job to another. There are other frictions in the labor market that prevent it working smoothly e.g. lack of knowledge about available jobs. When somebody loses their job (or chooses to leave it), they will have to look for another one. If they are lucky they find one quite quickly, but they may be unlucky and it may take some time. On average it will take everybody a reasonable period of time as they search for the right job. This creates unemployment while they look. The more efficiently the job market is matching people to jobs, the lower this form of unemployment will be. However, if there is imperfect information and people don't get to hear of jobs available that may suit them then frictional unemployment will be higher.

Similar financial terms

Frictional unemployment
Sometimes called transitional, this occurs when unemployed workers are temporarily without a paid occupation while moving from one job to another. There are other frictions in the labor market that prevent it working smoothly e.g. lack of knowledge about available jobs. When somebody loses their job (or chooses to leave it), they will have to look for another one. If they are lucky they find one quite quickly, but they may be unlucky and it may take some time. On average it will take everybody a ...

Unemployment rate
The ratio of the number of people classified as unemployed to the total labor force.

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Transaction demand (for money)

The need to accommodate a firm's expected cash transactions.


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