What Factors Affect Cyclical Unemployment Rates?

Cyclical unemployment, also known as unemployment with insufficient aggregate demand, is short-term unemployment caused by the decline of the overall economic expenditure and output level, that is, insufficient aggregate demand. It generally occurs during the depression phase of the economic cycle. This unemployment is consistent with cyclical fluctuations in the economy. In the recovery and prosperity stage, manufacturers are rushing to expand production, and employment has generally increased. During the recession and trough, due to insufficient social demand and bleak prospects, various manufacturers have reduced production and cut down employees a lot, forming a painful army of unemployment.

Cyclical unemployment

The cause of cyclical unemployment is mainly the decline of the overall economic level; because it is unavoidable, cyclical unemployment is also the last thing people want to see. Unemployment during the Great Depression of the 1930s was cyclical unemployment. versus

Keynes explanation

Since cyclical unemployment is caused by

There are three types of unemployment defined by economists: frictional unemployment (short-term unemployment caused by economic frictions such as changes in supply and demand, the invention of new machines, production automation, etc.), structural unemployment, and cyclical unemployment.

In a recession, frictional unemployment tends to decrease as people begin to worry that if they resign they will not find another suitable job. Those who have a lot of job options to wait for are still happy to change jobs, although this is less common during recession. However, these cattle are not counted as unemployed. Therefore, the reduction in frictional unemployment is largely due to the reluctance of people to voluntarily resign before many other options.

However, the reduction in frictional unemployment is relatively small, and it cannot offset the large increase in cyclical and structural unemployment. The big question now is to figure out whether the high unemployment rate in the United States is mainly due to structural or cyclical unemployment. If it is cyclical unemployment, then government intervention can help. If it is structural unemployment, it is caused by the decline of the automobile industry, manufacturing, real estate market and financial industry. These unemployed need to be absorbed by other industries. Some people think that the government cannot do much if it is this type of unemployment (I disagree). So the current debate is between those who say our unemployment problem is cyclical and that we need more government action, and those who say that unemployment is structural and the government can do very little. ^[1]