Cyclical Unemployment

In this article we have discussed the basic concepts of cyclical unemployment and its linkage with the business cycle. We have analyzed the cyclical unemployment that was witnessed in US. Next we have seen the steps that are taken by the government to counter the problem of cyclical unemployment.

Cyclical unemployment goes hand in hand with the business cycle or the ace of the economy. In the peak stage of the business cycle i.e. a very high GDP is matched with low unemployment rate. Again when the economy is passing through a recession the unemployment rate is very high. Hence cyclical unemployment may be alternatively defined as the negative correlation that exists with Gross Domestic Product.

When the economy is in a recession, the aggregate demand for goods and services is low. Consumer expenditure is also less. Production is lowered to match with the low aggregate demand. Lowering production entails downsizing the work force.

Cyclical Unemployment And The Business Cycle

As mentioned earlier the cyclical unemployment is linked with the business cycle. The business cycle, basically measures the change of the Gross Domestic Product with time. The business cycle is composed of four period of time, but the length of time cannot be predetermined. The business cycle begins with the economic slowdown and soon it is pushed into a trough where the economy hits is lowest point. Here the unemployment rate is the maximum. In the expansionary phase of the business cycle, a number of factors work in unison to boost the economy. The economy is on its path of recovery. Production is taking place at full swing and more workers are unemployed to meet the high production needs and hence unemployment is the minimum at this point.

Most commonly, a business cycle lasts for a very short time period, but there may be long-term factors that may trigger the economy into a depression, which is the magnified form of a recession. In this case the economy may be caught up in ling term unemployment.