9.3.2—Equilibrium/disequilibrium unemployment

Equilibrium unemployment is consistent with the prevailing wage and labour-market structure: people are searching or changing jobs while vacancies and workers are being matched. Disequilibrium unemployment occurs when the wage or conditions prevent the quantity of labour supplied from matching demand.

A wage floor above the market-clearing level can create excess supply. A recession can also create unemployment through weak demand, even if wages could adjust.

A graduate between suitable offers may be equilibrium unemployment. A binding minimum wage that leaves more applicants than vacancies creates a disequilibrium gap in the simple model.

The labels are about the cause and adjustment mechanism, not whether the unemployed person is trying hard enough.