Economically, frictional unemployment always occurs. It's the nature of any economy and the "friction" that occurs in job placement. Frictional unemployment is usually around 3% (typically 1% of the workforce from each component).
Frictional unemployment (Uf) is made up of 3 groups of people:
1. Those who just quit.
2. Those who just got fired.
3. Those who just started looking for a job.
How to calculate frictional unemployment (Uf)
Scenario: Crammerville's population is 120, containing 5 children. The labor force 100 has workers: 90 of which are working, 2 just quit their jobs, 1 was just fired, 1 recently entered the labor market, 4 were laid off because the economy was bad, and 2 have been unemployed for 5 years because they have no marketable skills. The remaining people of Crammerville who are not in the labor force wish they had a job, but have given up looking.
We can calculate frictional unemployment with the following formula:
Uf = Total # of Quits + Total # of Fired + Total # of Started Looking
In Crammerville, we can see 2 people just quit their jobs...
Situation: Crammerville's population is 120, containing 5 children. The labor force 100 has workers: 90 of which are working, 2 just quit their jobs, 1 was just fired, 1 recently entered the labor market, 4 were laid off because the economy was bad, and 2 have been unemployed for 5 years because they have no marketable skills. The remaining people of Crammerville who are not in the labor force wish they had a job, but have given up looking.
...which we can plug in like so:
Uf = Total # of Quits + Total # of Fired + Total # of Started Looking
Uf = 2 + Total # of Fired + Total # of Started Looking
In Crammerville, we can see 1 person got fired...
Situation: Crammerville's population is 120, containing 5 children. The labor force 100 has workers: 90 of which are working, 2 just quit their jobs, 1 was just fired, 1 recently entered the labor market, 4 were laid off because the economy was bad, and 2 have been unemployed for 5 years because they have no marketable skills. The remaining people of Crammerville who are not in the labor force wish they had a job, but have given up looking.
...which we can plug in like so:
Uf = Total # of Quits + Total # of Fired + Total # of Started Looking
Uf = 2 + 1 + Total # of Started Looking
In Crammerville, we can see 1 person just started looking for a job...
Situation: Crammerville's population is 120, containing 5 children. The labor force 100 has workers: 90 of which are working, 2 just quit their jobs, 1 was just fired, 1 recently entered the labor market, 4 were laid off because the economy was bad, and 2 have been unemployed for 5 years because they have no marketable skills. The remaining people of Crammerville who are not in the labor force wish they had a job, but have given up looking.
...which we can plug in like so:
Uf = Total # of Quits + Total # of Fired + Total # of Started Looking
Uf = 2 + 1 + 1
Uf = Total # of Quits + Total # of Fired + Total # of Started Looking
Uf = 2 + 1 + 1
When we solve, this results in a total of 4 members of Crammerville's population experiencing frictional unemployment.
Uf = Total # of Quits + Total # of Fired + Total # of Started Looking
Uf = 2 + 1 + 1
Uf = 4
How to convert to percentage
To determine the percentage of frictional unemployment in Crammerville, we need to divide our frictional unemployment value by the entire labor force.
Uf% = Uf / Labor Force
As calculated above, our Uf is 4...
Uf = Total # of Quits + Total # of Fired + Total # of Started Looking
Uf = 2 + 1 + 1
Uf = 4
...which can be plugged in like so:
Uf% = Uf / Labor Force
Uf% = 4 / Labor Force
In Crammerville, we have 100 workers in the labor force...
Situation: Crammerville's population is 120, containing 5 children. The labor force 100 has workers: 90 of which are working, 2 just quit their jobs, 1 was just fired, 1 recently entered the labor market, 4 were laid off because the economy was bad, and 2 have been unemployed for 5 years because they have no marketable skills. The remaining people of Crammerville who are not in the labor force wish they had a job, but have given up looking.
...which can be plugged in like so:
Uf% = Uf / Labor Force
Uf% = 4 / 100
Uf% = Uf / Labor Force
Uf% = 4 / 100
When we solve, it results in a frictional unemployment percentage of 4%!
Uf% = Uf / Labor Force
Uf% = 4 / 100
Uf% = 4%
