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Frictional Unemployment: Causes, Examples and More



The pandemic and its aftermath created massive changes in employment and unemployment statistics.

While unemployment is often spoken about in hushed tones or with a negative connotation, frictional unemployment does not necessarily fall into that category. So what is frictional unemployment, and how does it work?

Read on for:

  • Definition and examples of frictional unemployment
  • Causes of frictional unemployment
  • Ways to promote retention in the workforce

What is frictional unemployment?

Frictional unemployment is the natural transitional phase when a worker leaves a job by choice and is searching for another, as well as college graduates entering the workforce for the first time.

While negative undertones often accompany the term “unemployment,” frictional unemployment can signify someone looking for new opportunities.

This type of unemployment can be a sign of a healthy economy because workers are financially capable of leaving one job in search of another that is better suited for their skill set.

Because frictional unemployment is purposefully temporary, it does not add to overall unemployment statistics.

Frictional unemployment vs. other types of unemployment:

While frictional unemployment is temporary and does not necessarily negatively affect the economy, other types of unemployment do not share those characteristics.

To better distinguish the characteristics of frictional unemployment, look at a few other types of unemployment below.

Cyclical unemployment

This is the number of unemployed people during a specific economic cycle. The GDP (gross domestic product) is determined by the country’s strengths and weaknesses and the value of goods and services, which indicates each economic cycle.

Cyclical unemployment happens when the GDP falls significantly, reducing job opportunities and causing a spike in layoffs. This is one of the worst unemployment states and generally results in a government-mandated stimulus to boost the economy.

Structural unemployment

Structural unemployment happens when the economy and job market change and no longer match the skills of workers. This often occurs because of technological advances or changes in government policy.

For example, with the creation of self-checkout at grocery stores, demand for cashiers has gone down. This has caused layoffs in that industry, while former cashiers must find an alternate position and learn new skills to secure one.

Natural unemployment

Natural unemployment combines structural and frictional unemployment, indicating the lowest level unemployment can reach before the economy starts to experience inflation.

Related: Labor Shortage? Depends on Who You Ask

Causes of frictional unemployment

Because unemployment is a complex situation, frictional unemployment is never caused by just one thing.

Keep reading below to learn more about the many scenarios that trigger frictional unemployment.

Job dissatisfaction

Job dissatisfaction is not a new concept. However, the pandemic revealed to the world that there are alternative ways to work.

While some enjoy getting out of the house and venturing to the office daily, others prefer the comfort and flexibility of working from home or whichever remote location they choose.

A survey completed by Ernst & Young produced results that showed just how much workers value their flexibility:

  • 54% of workers want to choose when they work
  • 40% of workers want to choose where they work
  • 22% of workers want to work in the office
  • 33% of workers want a shorterwork week
  • 67% of workers believe location does not dictate productivity

Job dissatisfaction was highlighted during the pandemic, as people saw a whole different perspective on what work-life balance could look like. Before the pandemic, common job dissatisfaction complaints included being overworked, clashing with bosses and feeling unfulfilled.

Now, workers desire more autonomy as many believe productivity has nothing to do with location. And as 54% of the working population reports that they will leave their job if they are not permitted some form of job flexibility, frictional unemployment may rise.

Career switching and upskilling

Most people enter the job force before their mid-20s, so there is a high chance their interests and passions will change throughout their life.

The Bureau of Labor Statistics found that approximately 6.2 million workers, i.e. four% of the total workforce, will make a career switch at some point in their life. During this switch, they often enter into the frictional unemployment phase.

Additionally, people adapt, grow and learn new skills throughout their careers. New skills bring new opportunities, and often people outgrow their position or company entirely.

This situation is called “upskilling,” as people move onward and upward with their new skillset. When people leave their previous position in search of a new one that better suits their skills, they experience frictional unemployment.

Related: How to Advance Your Career Through Upskilling and Reskilling in Your Current Role

Life events

One of the most common causes of frictional unemployment is the various life events people encounter daily. Many workers leave their jobs for maternity, paternity or other caretaking reasons. Many leave their jobs due to relocation. And some decide they want to pursue higher education.

Whatever the personal reason, those who voluntarily leave their career for a temporary amount of time qualify as frictionally unemployed.

Effects of frictional unemployment

The pandemic shifted so many factors in the workforce. It showed people a glimpse of flexibility; many have left jobs that will not grant remote work.

In addition, there has been a considerable movement toward salary transparency over the past decades. Earlier generations were taught to keep money private; however, millennials have flipped the script.

Communicating salaries amongst peers have put more pressure on companies to be transparent about wages — causing salaries to become more competitive. When employees see the same job at another company for higher pay and more flexible work, it becomes increasingly more difficult for their current company to retain them.

How to promote retention in the midst of frictional unemployment:

Frictional unemployment is a sign of a competitive job market. While this is great for workers, it often means a stressful time for companies. With employees leaving for better opportunities, it can be difficult to fill empty positions.

However, some strategies promote retention and combat frictional unemployment.

Enhance job flexibility

Again, 54% of workers want to choose when they work, and 40% want to decide where they work. Offering job flexibility shows that companies are listening to their employees and trusting them to get the job done.

Companies should offer remote work, a hybrid model or flex days if possible. The workplace dynamic is changing, so it’s vital to adapt to remain competitive.

Maintain a strong, positive company culture

Company culture matters whether employees work from home or in the office. An effective team can collaborate, communicate freely and work through challenges that make them stronger.

Company culture is a top-down concept, and leaders should practice the following:

  • Communicating clearly and consistently
  • Following through on promises
  • Considering what is best for both employees and the company as a whole

Offer professional development, mentoring and coaching

When companies prioritize helping employees grow, it does not go unnoticed. Whether employees are brand new or veteran team members, providing employees with coaching and mentoring opportunities may make them feel more cared for.

These opportunities can include the following:

  • Training sessions
  • Job shadowing and informational interviews
  • Networking events

Practice job transparency

As employees enter the job search, they want transparency. Companies should create top job listings on popular job boards like Indeed, LinkedIn, ZipRecruiter and CareerBuilder. to attract top talent. Additionally, companies should maintain easy-to-use career pages.

Related: ZipRecruiter vs. LinkedIn: Which Is the Better Job Search Site?

Prospective employees look for job postings that include:

  • The job title with a detailed job description
  • Role responsibilities
  • Mandatory and desired qualifications and skills
  • Work location (remote work or in-person)
  • Company background and mission statement
  • Working hours and wages
  • Benefits
  • Description of the hiring process

Related: What’s My Job, Again? The Fine Art of Crafting the Job Description

Relocation assistance

Moving across state lines or the country is incredibly costly, especially if employees have a family to move with them. A move can cost anywhere from $2,000 to $15,000, depending on factors like distance, number of family members, number of vehicles and volume of possessions.

Offering relocation assistance is a huge perk and helps the financial burden it causes. Companies that provide relocation services are more likely to obtain and retain employees who appreciate the accommodation.

Offer perks

One of the most important things a company can offer is health care benefits. Competitive health care benefits are a huge attraction and retention tool when retaining employees. In addition, wellness perks show that companies value their employees’ health and work-life balance.

Wellness perks might include:

  • On-site gyms or gym membership discounts
  • Healthy office snacks
  • Mental health education
  • Company-wide wellness days or weeks

One other small but mighty perk is the employee discount. Everybody loves a deal, whether it’s for a company’s products or a discount for a partner company. Employee discounts are a great way to show appreciation.

Related: Everything We Know About Unemployment Benefits During the Coronavirus Pandemic

What frictional employment can mean for you

Frictional unemployment is not a new concept. Workers have always maintained different reasons for leaving jobs, from finding new opportunities to moving to a new state. However, the pandemic truly changed the workforce forever.

People evolved their mindset, their priorities and the way they look at workplace dynamics. This shift caused a spike in frictional unemployment and new pressures placed on companies to offer more flexibility and competitive offers.

As the economy begins to slowly recover in the aftermath of the pandemic, it is vital to keep an eye on economic and workforce trends if you are considering becoming part of the frictionally unemployed population.

For the most up-to-date information on the economy, finance and the state of the workforce, visit Entrepreneur today.

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Your Company’s Responsible Guide to Staying Profitable in a Recession



Opinions expressed by Entrepreneur contributors are their own.

The recent trend of easy money and exorbitant valuations has skidded to a halt amid recent economic volatility. Understandably, many companies rode that wave as long as they could, but in doing so many prioritized growth over sustainability and sound leadership. Layoffs continue to ripple through the tech ecosystem, so employees both in this sector and elsewhere are feeling the consequences.

Having to let go of staff members is all but unavoidable in a company’s lifecycle, but there is always more that can be done to keep businesses afloat while preserving morale. Strategies can include responsible budgetary decision-making, thoughtful and prudent responses to external pressures and transparent dialogue with employees, to name a few. Such actions can help companies remain healthy, productive and profitable, even as they navigate challenging waters.

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This is What You Need in Your 5-Year Marketing Plan



Opinions expressed by Entrepreneur contributors are their own.

We’ve all heard the interview question, “Where do you see yourself in five years?” Marketers routinely take that question and apply it to their marketing strategies. They figure out what they want to achieve and then develop actionable steps to get there. Keep in mind, these plans aren’t designed to be all-encompassing. They serve as a guidebook for different scenarios while getting the team thinking about what they’d like to accomplish long-term.

Your five-year plan is a way to build an overarching metric for how you’re doing — or how you plan to do over the next half-decade. There are many things to consider when building your plan — here are a few to look at carefully:

The 3 key buckets

A successful five-year marketing plan should fixate on three main questions:

  1. What assumptions can you make about the next five years within your company?
  2. What goals do you want to achieve?
  3. What are the metrics you’ll use to measure those goals?

Assumptions are what you think won’t change in the business over the next five years. For example, you might assume that you will continue using particular vendors or that packaging costs will remain stable. From there, you can determine your goals — like boosting sales by 50% or converting 10,000 new customers. The metrics that measure your progress might be units sold or your company’s market share. It’s essential to include both readily-accessible metrics — such as website views — and brand metrics that might be a bit harder to come by, such as the associations your customers have made with your products or company.

Importantly, there’s no “right” or “wrong” when it comes to answering these questions. Every business has its own vision, resources and position, which all influence its marketing strategy. The aim is to develop a plan that will produce the most desirable outcome for you, rather than worrying about what other businesses have the capacity to do.

Related: Use These 5 Steps to Create a Marketing Plan

Narrowing your focus

Just like consumer preferences, marketing tactics are constantly shifting. Social media demonstrates this well. Because social media platforms have skyrocketed over the past two decades, marketers no longer rely solely on traditional platforms such as print or television ads. And even within social media, things aren’t constant. TikTok has become one of the fastest-growing platforms, quickly overtaking Facebook.

With so many options, your marketing plan must keep a narrow focus. For some companies, TikTok doesn’t matter. They can’t yet measure the return they’re getting from the platform, so this isn’t exactly a feasible opportunity. Don’t be tempted to try everything or be everywhere. It’s a matter of isolating what you practically can use to give you the insights that will help you.

Two questions will help focus your strategy:

  • How do your goals compare to last year?
  • What are you striving for (e.g., enhancing the brand vs. increasing brand awareness)?

How you answer those questions will help you identify where and how to focus your efforts so you don’t get lost in a bunch of small, irrelevant tactics.

Using your budget

Most people think of budgets as being stable or hard data — but almost all companies work with unknowns. In reality, the best they can do is come up with an educated guess that seems to make sense – a ballpark range. Because nobody can plan with certainty for every scenario — and because it’s so easy to become overwhelmed with an infinite range of outcomes — it’s advisable to lean on a few key financial assumptions and build a strategy around those.

Once you have a budget figure to work with, create high and low projections for everything you want to do. Let’s say the aim is to get to 50% brand awareness. What would your plan look like if you exceeded that and got to 75%? Alternatively, what would you do if awareness went down to 25%? Creating these high and low projections will let you design a more flexible approach and avoid being caught too off guard.

As you come up with your main scenarios and high-low projections, think about the key internal drivers you’ll need to address next year. Consider the risks, and assess whether you’ll have the data, technology and skills to develop and maintain what you expect to put forward. Keep in mind that it’s more important to pivot when issues come up than to predict what’s going to happen accurately.

Related: 4 Tips for Developing a Marketing Plan That Will Actually Grow Your Business

Paint flexibly within your broad strokes

A five-year marketing plan paints a broad, long-term picture of how you’ll communicate with your audience while giving details about your projected products or services. It includes assumptions and factors that aren’t necessarily static, so you have to approach it with a grain of salt and be ready to shift gears if the plan doesn’t work.

Even so, if you stick to three key buckets (assumptions, goals and metrics), keep your tactical focus narrow and incorporate multiple projections in your budget, you should end up with a strategy that blends the data and flexibility needed to strive in a changing world. Because annual marketing plans need to connect to your long-term marketing vision, let the annual marketing meetings serve as check-in points to keep your longer-term marketing plan relevant and viable.

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Lauren Sánchez Is Heading to Space on a Girls Trip



Sorry, Jeff — this one is for the girls.

Jeff Spicer / Stringer I Getty Images

The Amazon executive chairman’s girlfriend, a former journalist who collaborates with him on philanthropy, is bringing a girl gang to space

Jeff Bezos’ girlfriend, Lauren Sánchez, said in a new interview with the Wall Street Journal that she planned to take an all-female trip to space with the Amazon founder’s space manufacturing company, Blue Origin.

Five women will join her on the journey.

“It’s going to be women who are making a difference in the world and who are impactful and have a message to send,” she told the outlet.

The mission is set for early 2024, and the passengers’ names will be announced at a later date.

The WSJ’s report was Sánchez’s first solo interview, the outlet noted, since her relationship with Bezos went public in 2019, shortly after his divorce announcement from now ex-wife, MacKenzie Scott.

The interview also talks about Sánchez’s relationship with Bezos and the business advice he’s given her (keeping meetings under an hour, speaking last as a boss).

Sánchez is a former broadcast journalist and a helicopter pilot who founded her own filming company Black Ops Aviation, per Insider.

“Right now, I’m immersing myself in philanthropy and strategic giving,” she told the outlet. She also has a new production company, Adventure & Fellowship.

Bezos and Sánchez also work together on picking the winner for the Bezos Award for Courage & Civility, which was awarded to Dolly Parton in 2022, giving her $100 million to dole out to charities as she pleased.

But don’t expect Bezos to crash the girls’ trip. “He’ll be cheering us all on from the sidelines,” Sánchez said, adding that Bezos is “excited to make this happen with all of these women… He’s very encouraging and excited, and he’s thrilled we’re putting this group together.”

Sánchez’s nonprofit work includes This Is About Humanity, which helps give supplies to kids separated from their parents at the U.S.-Mexico border, supporting the Bezos Earth Fund, which fights climate change, and working with the Bezos Academy, a system of free Montessori schools.

Bezos told CNN in an exclusive that aired in mid-November that, like many other billionaires have pledged to do, he would give away most of his money.

Ex-wife Scott, meanwhile, has donated over $14 billion since 2019, much of it coming from the settlement with Bezos.

Bezos has always planned on giving his money away, Sánchez told the outlet.

“Jeff has always told me since I’ve known him that he’s going to give the majority of his money to philanthropy,” she said.

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