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Cyclical unemployment gives us a idea why unemployment rises during period of recession and falls when there is an economic expansion. It does not explains the remaining level of unemployment even when the economy is stable and growing strongly.

The level of unemployment that exists even when the economy is stable is referred to as natural rate of unemployment. This unemployment results from the combination of economic, social, and political factors that occur when economy is stable and growing strongly.

In market economy there are both type of companies doing bad [firing and laying offs] and good[ looking for more workers to hire] for various reasons. Process of leaving one job and finding or joining new job takes time.

As workers move between jobs, the unemployment existing as a result is known as frictional unemployment.

Another major factor of natural rate of employment is structural unemployment. It is type of employment where person is jobless and lacks skills which are required or in demand in labor market.

Advancement in technologies have created the demand for high-skilled workers and decreased the demand for low-skilled employees.