What are the similarities and differences between Natural Unemployment and Cyclical Unemployment?
Without straying too much into economic theory or technicalities, natural unemployment or the natural rate of unemployment refers to unemployment that exists even when labor supply and demand for labor are in balance, or equilibrium. You might say that natural employment is the unemployment that exists even when the economy is functioning at full employment. It has two main components: frictional and structural unemployment. Frictional unemployment refers to workers who are temporarily without jobs and searching for new ones that are better suited to their skill sets and work preferences (schedule, pay levels, promotional prospects, location, satisfaction level, quality of work, etc.). Much of frictional unemployment is voluntary. Economists consider frictional unemployment to be healthy for an economy, as it should ultimately result in better matching a workers skills and qualities to those required of a job, thus boosting productivity. Some churning within the labor force is necessar
