How is unemployment measured and what are frictional, structural, and cyclical unemployment?

• A. Unemployment rate = unemployed / labour force × 100; frictional = short-term between jobs; structural = mismatch of skills or locations; cyclical = related to business cycles.
• B. Unemployment rate = employed / labour force × 100; frictional is long-term; structural seasonal; cyclical random.
• C. Unemployment rate = unemployed / total population × 100; frictional permanent; structural seasonal; cyclical long-term.
• D. Unemployment rate determined by government policy; frictional occurs when workers refuse jobs; structural natural; cyclical seasonal.

Answer: (A)

Unemployment is measured by the unemployment rate, which is the number of people who are unemployed and actively seeking work divided by the labour force, then multiplied by 100. The labour force includes those who are employed plus those who are unemployed but actively looking for a job; people not seeking work are not counted in the labour force.

Frictional unemployment is the short-term period when people are between jobs or entering the workforce for the first time. It reflects normal job-search time as individuals match with suitable roles.

Structural unemployment happens when there is a mismatch between workers’ skills or locations and the jobs available. It tends to be longer-lasting and may require retraining or relocation.

Cyclical unemployment is tied to the broader business cycle. During downturns, reduced demand leads to fewer hires; as the economy improves, cyclical unemployment falls.