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Cyclical unemployment

Cyclical unemployment is a type of unemployment that is caused by fluctuations in the business cycle or economic cycle. It occurs when there is a downturn or contraction in the economy, which leads to a decrease in demand for goods and services, and subsequently a decrease in demand for labor.

During a recession, companies may lay off workers due to decreased demand for their products or services, which leads to an increase in cyclical unemployment. Conversely, during an economic expansion, companies may hire more workers to meet increased demand for their products or services, leading to a decrease in cyclical unemployment.

Cyclical unemployment is considered to be a temporary type of unemployment that is directly related to the business cycle. It is often contrasted with structural unemployment, which is caused by a mismatch between the skills or location of workers and the available job opportunities, and frictional unemployment, which is caused by the time it takes for workers to search for and find new jobs.

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