The type of unemployment that measures the time period between jobs when economic agents are searching for jobs or in the process of moving to another job. Another term for this is search unemployment
Below is a diagram to illustrate the effects of frictional unemployment on an economy in a AD-AS framework. In this instance an increase in frictional unemployment reduces the pool of labour available for firms to hire and this pushes up the wages of existing workers as the labour market tightens and workers become more valuable in the employer's eyes. This then causes the SRAS curve to shift inwards as firms have to cut production with a lack of employment. But because frictional unemployment is often a form of short-term employment these effects are soon reversed and the economy moves back to its original position.
