While on the surface it appears that a 0% unemployment rate would be terrific for the citizens of a country, having a small amount of unemployment is actually desirable. To understand why, we need to look at the three types (or causes) of unemployment:
Cyclical Unemployment is defined as occuring "when the unemployment rate moves in the opposite direction as the GDP growth rate. So when GDP growth is small (or negative) unemployment is high." When the economy goes into recession and workers are laid off, we have cyclical unemployment.
Frictional Unemployment: The Economics Glossary defines frictional unemployment as "unemployment that comes from people moving between jobs, careers, and locations." If a person quits his job as an economics researcher to try and find a job in the music industry, we would consider this to be frictional unemployment.
Cyclical Unemployment is defined as occuring "when the unemployment rate moves in the opposite direction as the GDP growth rate. So when GDP growth is small (or negative) unemployment is high." When the economy goes into recession and workers are laid off, we have cyclical unemployment.
Frictional Unemployment: The Economics Glossary defines frictional unemployment as "unemployment that comes from people moving between jobs, careers, and locations." If a person quits his job as an economics researcher to try and find a job in the music industry, we would consider this to be frictional unemployment.
