12/03/2025

We do have to understand that AI and the replacement of humans with robots is a big factor at the present time. Some people are trying to blame the tariffs. We all know our country has been under great stress due to the Democrats spending habits. In order to bring our country back to a level of prosperity, President Trump has started the tariff program – whereby the Democrats were giving our money and goods with a very low tariff. It seemed the Democrat Socialists were paying countries to buy our goods and the fact that the Democrats/Bush II/former Republican turned Democrat ran out most of the manufacturing companies..

Now, President Trump is taking our country back to prosperity by re-establishing manufacturing in the country with the Democrat Socialists kicking and screaming and doing everything they can to stop him.

We have to understand that AI will change our work force because humans will be replaced and the AI folks will have to establish with the government an additional column in the employment report called non-humans. The new unemployed will have to seek other work or form their own new business.

As far as the tariffs are concerned and our high debt, we need to pay off the debt. Some say that bankruptcy will be claimed and others state that we have to be in debt because our dollar is used as the world currency?

https://bipartisanpolicy.org/explainer/whats-behind-the-u-s-dollars-dominance-and-why-it-matters/

ttps://bipartisanpolicy.org/explainer/whats-behind-the-u-s-dollars-dominance-and-why-it-matters/

https://www.thebalancemoney.com/causes-of-unemployment-7-main-reasons-3305596

ttps://www.thebalancemoney.com/causes-of-unemployment-7-main-reasons-3305596

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7 Causes of Unemployment

What’s Behind Each Type of Unemployment?

By 

Kimberly Amadeo

Kimberly Amadeo

Kimberly Amadeo has 20 years of experience in economic analysis and business strategy. She is an expert on the U.S. and world economies.

Updated on May 24, 2024

In This Article

• Frictional Unemployment
• Structural Unemployment
• What Causes Cyclical Unemployment?
• Demand-Deficit Unemployment
• Joblessness and Unemployment
• Frequently Asked Questions (FAQs)

There are seven causes of unemployment. Four causes create frictional unemployment. This type of unemployment is when employees leave their jobs to find a better one. Two causes create structural unemployment. That is when workers’ skills or income requirements no longer match the jobs available. The seventh cause leads to cyclical unemployment.¹

Frictional and structural unemployment occurs even in a healthy economy. The natural rate of unemployment is between 4% and 5%, according to the Federal Reserve.² The Bureau of Labor Statistics (BLS) defines unemployed people as those who are jobless and have actively looked for work in the past four weeks as well as those who have been temporarily laid off from a job. If they don’t keep looking, the Bureau of Labor Statistics doesn’t count them in the labor force.³

4 Causes of Frictional Unemployment

One cause of unemployment is voluntarily leaving the workforce. Some of the unemployed have saved enough money so they can quit unfulfilling jobs. They have the luxury of searching until they find just the right opportunity. The second cause is when workers relocate. They are unemployed until they find a position in the new town.

The third cause is when new workers enter the workforce. This includes students who graduate from high school, college, or any higher degree program. They look for a job that fits their new skills and qualifications. That is a primary cause of youth unemployment.⁴

The fourth cause is when job seekers re-enter the workforce. These are people who went through a period in their lives when they stopped looking for work. They could have stopped working to raise children, get married, or care for elderly relatives. These four causes are an unavoidable part of the job search process. The good news is that frictional unemployment is usually voluntary and short-term.

2 Causes of Structural Unemployment

Structural unemployment is neither voluntary nor short-term. These next two causes lead to long-term unemployment. The fifth cause is advances in technology. This is when computers or robots replace workers. Most of these workers need more training before they can find a new job in their field.

The sixth cause is job outsourcing. That is when a company moves its manufacturing or call centers to another country. Labor costs are cheaper in countries with a lower cost of living. This situation occurred in many states after NAFTA was signed in 1994. Many manufacturing jobs moved to Mexico.⁵ It also occurred once workers in China and India gained the skills needed by American companies.⁶⁷

What Causes Cyclical Unemployment?

The seventh cause of unemployment is when there are fewer jobs than applicants. The technical term is demand-deficient unemployment. When it happens during the recession phase of the business cycle, it’s called cyclical unemployment.⁸¹ 

Low consumer demand creates cyclical unemployment. Company profits fall when demand falls. If companies don’t expect sales to pick up anytime soon, they generally lay off workers. The higher unemployment causes consumer demand to drop even more, which is why it’s cyclical. It results in large-scale unemployment.⁹ Examples include the financial crisis of 2008 and the Great Depression of 1929.

Raising the Minimum Wage and Demand-Deficit Unemployment

Demand-deficit unemployment sometimes occurs when wages are too high.⁸ That’s one of the arguments against higher minimum wages. Critics argue that when businesses are forced to pay a higher salary per person, they must let other workers go.¹⁰

Note

In some price-sensitive industries, that’s true. But most companies can pass the cost onto their customers. 

Not All Causes of Joblessness Create Unemployment

If someone gives up looking for work, the BLS does not count them in the unemployment rate. If someone retires, goes back to school, or leaves the workforce to take care of children or other family members, that is not unemployment because they no longer look for work. Even if they would prefer a job, the BLS doesn’t count them as unemployed unless they looked in the past month.

People who have searched in the past year, but not the past month, are called marginally unemployed. The BLS considers this the U-5 and U-6 alternative measures of labor underutilization, known more broadly as the “real unemployment rate.”¹¹¹² Some people argue that the government undercounts unemployment by reporting the official rate, rather than the “real” rate.¹³¹⁴

Key Takeaways

• For the BLS, unemployment is the state in which someone has no job and has been looking for work for the past month. Those who have stopped job searching are not counted as part of the unemployed labor force.³
• Unemployment may be classified as either a frictional, structural, cyclical, or demand-deficit type.
• The natural rate of unemployment is between 4% and 5%.²
• Unemployment is a key economic indicator. High employment rates can be symptomatic of a distressed economy. Conversely, very low unemployment rates can signal an overheated one.

Frequently Asked Questions (FAQs)

Who is counted as unemployed?

The BLS defines unemployed workers as those who are out of a job and currently available to work, and who have actively looked for work in the past four weeks. It also includes workers who are temporarily laid off but expecting to return to the workforce, whether they have been actively looking for a job or not.¹⁴

Who qualifies for unemployment benefits?

To qualify for unemployment benefits, a person must be unemployed “through no fault of their own,” have worked during a specific period, have met minimum state wage requirements, and be actively seeking work. These are the minimum federal requirements, but some states have additional requirements.”

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