What Are the Different Types of Unemployment?

The five types of unemployment are frictional, structural, cyclical, seasonal and technological. These are the types named in Cambridge International AS Level Economics under Unemployment (4.5.3). They differ mainly in why people are out of work.

The five types

• Frictional unemployment occurs while people move between jobs or enter the labour market and search for work. For example, someone who has left one job and is applying for another may be unemployed briefly.
• Structural unemployment happens when workers’ skills or locations do not match the jobs available. A decline in a particular industry might leave experienced workers unable to find similar work nearby.
• Cyclical unemployment results from a fall in demand across the economy. When spending and output fall, firms may need fewer workers and make redundancies.
• Seasonal unemployment occurs because demand for some work changes at predictable times of year. For example, a firm hiring extra workers for a holiday season may no longer need them afterwards.
• Technological unemployment occurs when new technology replaces tasks previously done by workers. Self-service equipment, for instance, may reduce demand for some roles.

How to tell them apart

Look for the cause, not just the fact that someone has lost a job. A worker laid off because customers are buying less during an economy-wide downturn is an example of cyclical unemployment. If their job disappears because a machine now does the work, it is technological unemployment.

A common exam mistake is to treat technological and structural unemployment as completely unrelated. Technological change can cause a structural mismatch if displaced workers do not have the skills needed for available jobs. Cambridge names both types, so explain the cause clearly when choosing which term best fits an example.