What is Cyclical Unemployment?
- Cyclical unemployment is unemployment caused by deviations of output from its potential level.
How Do I Remember It?
- Think of cyclical unemployment as “cycle-related” unemployment. It’s like the ups and downs of the economy’s cycle affecting the demand for labor.
Real World Example
- During the 2008 financial crisis, many industries experienced a decline in demand for their products or services, leading to layoffs and job losses. This increase in unemployment was largely cyclical, as it was driven by the overall downturn in economic activity during the recession. As the economy recovered and grew, cyclical unemployment decreased, and many of the lost jobs were regained.
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By: Ryan Aquino
