What is the difference between full employment and zero unemployment?

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pohnpei397 eNotes educator| Certified Educator

A lot of people think full employment means that no one is unemployed, but that is not how economists use this term.  In order to understand this, you must realize that there are 3 kinds of unemployment.

The three kinds are structural (people lose jobs because what they are making is no longer wanted), frictional (people are "between" jobs or just starting to look), and cyclical (people are out of work because consumers can't afford the stuff they make).  Of these, the first two are seen as "good" kinds of unemployment.  Therefore, the term full employment refers to a situation in which there is no cyclical unemployment.

By contrast, zero unemployment would mean that there is no structural or frictional unemployment.  Economists believe that such a situation would be bad for an economy.