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[Alex] Frictional unemployment is short-term unemployment
caused by the ordinary difficulties of matching employee to employer.
The moment a student graduates, for example,
and starts to look for work, they're officially unemployed.
After a few weeks of applications and interviews,
the student might be offered a job, but perhaps the pay is too low,
or the location not quite what the student wanted.
The student remains unemployed.
Only after a few weeks more does the student find and accept a job
and officially exit unemployment and enter employment.
The student's period of unemployment --
that's frictional unemployment.
Now frictional unemployment -- it's ever-present,
because the U.S. economy is very dynamic.
To see this dynamism, let's take a closer look
at some of the job statistics.
We often hear on the news
that, say, 200,000 new jobs were created or lost this month.
Here's a graph of net employment changes.
You can see the big recession in 2008 and 2009.
when in the worst months
as many as 800,000 jobs were being lost.
Since the end of 2010, you can also see the recovery,
where there have been a little more
than about 200,000 jobs created every month.
Now, these figures -- they are useful,
but it's important to understand that they're net changes.
When the news reports
that 200,000 new jobs were created this month,
what actually happened is that there were
around 4.5 million new hires
and 4.3 million new separations,
that is quits or layoffs.
So the net number -- it hides the vast amount of job change
which is actually happening behind the scenes.
Every month, millions of people quit their jobs --
sometimes to get a new job,
sometimes to go back to school, sometimes to retire.
Other people start new jobs after graduating
or finding new opportunities.
This all causes frictional unemployment
and it's a normal part of a dynamic economy.
Now sometimes changing jobs isn't by choice.
People lose their jobs due to a firm going bankrupt,
downsizing, or moving locations.
But that can also be part of a healthy economy.
When firms compete,
some will naturally do better than others
at delivering the products and the services
that consumers actually want.
We used to fly Pan Am, eat at Bob's Big Boy
and choose our top 10 friends on Myspace.
These firms, however, they've disappeared,
while others such as Southwest Airlines,
Shake Shack and Facebook have grown.
It's easy to see these big changes.
Less obvious are the smaller changes that occur every day.
But all of these changes are important
because they move resources across the economy
from where those resources have low value
to where the resources have high value.
So short-term, frictional unemployment --
it's inherent in a growing and changing economy.
And overall, it's a small price to pay for growth and change.
More serious, however,
are the two other types of unemployment:
structural unemployment and cyclical unemployment.
That's what we'll turn to next.
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