Structural unemployment occurs when available workers and available jobs do not match—because workers’ skills or locations differ from what employers need. Technology, industry change, and geographic shifts can create that mismatch. It differs from cyclical unemployment, which rises when overall demand weakens, and frictional unemployment, which occurs as people move between jobs. These causes can overlap, and the official unemployment rate does not identify which one explains an individual’s joblessness.
What is structural unemployment?
Structural unemployment is joblessness linked to a mismatch between job seekers and available work. The mismatch can involve the skills employers require, the location of jobs, or both. The U.S. Bureau of Labor Statistics (BLS) describes it in terms of unemployed workers’ skills or locations not matching available jobs’ requirements or locations. BLS Monthly Labor Review
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It is an explanation for unemployment, not simply a label for how long someone has been out of work. Long-term unemployment describes duration; structural unemployment describes a mismatch. A person can be unemployed for a long time for other reasons, including weak hiring during an economic downturn.
What causes structural unemployment?
Structural unemployment can arise when the kinds of jobs employers offer change faster than workers can adapt, or when jobs and workers are in different places.
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- Technology and automation: New technology can reduce demand for some tasks while expanding others. Workers whose experience is concentrated in displaced tasks may need training to qualify for new roles. The Federal Reserve Bank of St. Louis identifies technological change as a possible source of structural unemployment. Federal Reserve Bank of St. Louis
- Industry change or decline: When an industry contracts and another grows, workers may find that openings are concentrated in fields with different requirements. BLS discusses mismatch when an older industry declines while a different industry emerges. BLS Monthly Labor Review
- Offshoring and reorganization: Businesses may reorganize work or move some activities abroad, changing which roles remain and which skills employers seek. BLS Monthly Labor Review
- Geographic shifts: A worker may have relevant experience but live far from the available jobs. Relocation may be costly or impractical, so location itself can obstruct a match. BLS Monthly Labor Review
Examples of structural unemployment
Workers displaced when an auto plant moves
If an auto assembly plant moves away, its former employees may need to relocate to find comparable work, retrain for jobs in other industries, or both. This example illustrates how a geographic mismatch can combine with a skills mismatch. Federal Reserve Bank of St. Louis
A bank teller role changes as mobile banking expands
A Federal Reserve Bank of Atlanta educational lesson uses a bank teller whose position is discontinued as mobile banking rises to illustrate technology-driven changes in labor demand. It is an instructional scenario, not evidence that every teller job loss has the same cause or outcome. Federal Reserve Bank of Atlanta
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How it differs from cyclical and frictional unemployment
| Type | What explains the unemployment | Illustration |
|---|---|---|
| Structural | Workers’ skills or locations do not match available jobs. | A displaced worker’s experience no longer fits local openings. |
| Cyclical | Weak overall demand during an economic downturn reduces hiring and raises job losses. | Employers across many sectors cut positions during a recession. |
| Frictional | People are between jobs or searching for a suitable position. | A worker leaves one job and searches for another. |
The categories are useful explanations, not mutually exclusive boxes. A downturn can first cause cyclical unemployment; if industries and hiring needs change while the downturn persists, some workers may also face a structural mismatch. The Federal Reserve has cautioned that inadequate demand can explain much of high unemployment in a weak recovery, even when matching problems are also present. Federal Reserve Board, Janet Yellen’s 2013 speech
How can you tell whether unemployment is structural?
No single clue proves a structural cause. A careful assessment looks at labor demand and the match between workers and openings together:
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- Check overall demand: Broad weakness associated with a recession supports a cyclical explanation. Federal Reserve Board
- Compare vacancies with job seekers: Vacancies alongside unemployed workers may be consistent with mismatch, but vacancies alone do not establish it. Hiring can also be slow when demand is weak. Federal Reserve Board
- Look at qualifications and location: Evidence that openings require skills workers lack, or are located far from them, bears directly on structural mismatch. BLS Monthly Labor Review
- Consider how the situation evolved: Long unemployment or a slow recovery does not by itself show that the cause has become structural; cyclical weakness and changing labor demand can coexist. Federal Reserve Board
How is structural unemployment measured?
The BLS’s official unemployment rate measures unemployed people as a share of the labor force. For this measure, an unemployed person is jobless, actively looking for work, and available to take a job. The rate reports labor-force status; it does not assign each unemployed person a cause or provide a separate official structural-unemployment rate. BLS, How the Government Measures Unemployment
The BLS also reports broader measures of labor underutilization. These include people marginally attached to the labor force and, in the broadest measure, people working part time for economic reasons. Those measures add context about underused labor, but they do not by themselves identify structural unemployment. BLS, How the Government Measures Unemployment
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