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Cyclical Unemployment: Causes, Examples & More

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Unemployment has many types, causes, and specific features. While the pandemic and its aftermath created considerable economic shifts, unemployment has always ebbed and flowed for several reasons.

With the word “recession” in the air, you may wonder where cyclical unemployment falls on the spectrum and what it entails.

Read on for more about:

  • Definition and cyclical unemployment examples
  • Causes of cyclical unemployment
  • Ways to prevent cyclical unemployment

What is cyclical unemployment?

Cyclical unemployment is the percentage of people without work during an economic cycle. Economic activity typically follows the fluctuations of the gross domestic product (GDP). When the GDP experiences a significant fall, layoffs and sometimes even a recession can follow.

As economists study and predict trends toward cyclical unemployment, the government may employ its policymakers to create new fiscal policy and monetary policies to promote a more robust labor force and overall economic upswing.

The stages of cyclical unemployment

Because cyclical unemployment fluctuates and follows a pattern, it looks relatively similar each time it occurs. Read below for the stages of cyclical unemployment.

1. A recession begins

Recessions can be caused by many things — some from a burst in the economy, like the housing market crash of the Great Recession, and others are a slower burn of the business cycle.

Either way, consumer demand is down, which makes jobs more scarce because there is a higher amount of people in the workforce than there is demand for goods and services.

2. Layoffs occur

When demand is down, there becomes less profit and an excess of workers. This results in companies having to lay off employees. This can result in more people collecting unemployment benefits, which puts an even more significant strain on the economy.

3. The recession progresses

As the economic downturn continues, cyclical unemployment rates continue to experience fluctuations. Throughout this time, economists analyze macroeconomics and microeconomics and their aggregate demand variables to predict trends and help the government create policies that may fuel the economy.

Macroeconomics examines big-picture factors like:

  • National markets
  • Employment
  • Gross domestic product
  • Inflation

Microeconomics examines little-picture factors like:

  • Individual markets
  • Supply and demand
  • Goods and services

4. An economic upturn begins

The upside to a recession is that the economy operates on a cycle, just like cyclical unemployment. This means that the economic contraction might eventually end, the economy can enter an upturn, and the quest for full employment may continue.

During this period, the business cycle begins to self-correct, consumer demand can increase, or the Federal Reserve may provide incentives to boost the economy.

5. Employees return to work

In the final stage of the cycle, people begin to return to the workforce. Ideally, this can mark the beginning of lowered unemployment rates. However, other types of long-term unemployment can happen due to a changing economy and its after-effects.

Cyclical unemployment vs. other types of unemployment

While cyclical unemployment is a temporary state based on the economy, other types of unemployment have different causes and characteristics. Look at a few other types of unemployment below that can happen in addition to cyclical unemployment.

Structural unemployment

Structural unemployment occurs when the economy changes and the job market mismatches workers’ skills. This is generally caused by government policy changes or technological advances that replace human skills.

Frictional unemployment

Frictional unemployment happens when an employee leaves a position by choice and looks for their next venture.

This can also refer to the gap recent graduates may experience before finding their first job. Because workers are financially stable enough to support themselves during this time of purposeful unemployment, it often indicates a healthy economy.

Natural unemployment

Natural unemployment is an indicator that inflation is on its way. Rises in the natural unemployment rate often result from a combination of structural and frictional unemployment, which may increase the cost of goods and services.

Related: Everything We Know About Unemployment Benefits During the Coronavirus Pandemic

10 examples of cyclical unemployment throughout history

Cyclical unemployment is directly correlated with the cycles of an economic recession. Tracking the recessions throughout history can indicate the cyclical unemployment of the U.S. economy. See below for examples of each recession and the corresponding unemployment cycles since World War II.

1. End of World War II: February 1945 to October 1945

The war resulted in substantial economic growth for the United States, with a high demand for jobs to support the needs of the military. However, when the war ended and government spending dried up, the labor market collapsed, and the economy followed.

Fortunately, this recession lasted less than a year as the manufacturing industry was able to adapt and create non-war related new jobs, especially for construction workers.

2. Post-war consumer spending slows: November 1948 to October 1949

During the war, there were government-mandated rations and restrictions. But when those were lifted, American citizens went wild with spending. However, after the spending craze slowed and soldiers struggled to find their new place in the workforce, the economy struggled to balance.

4. Asian flu pandemic: August 1957 to April 1958

In 1957, a pandemic in Hong Kong spread to India, Europe, and the United States. It killed over one million people and crushed U.S. exports by more than $4 billion, triggering another recession. During this time, unemployment surged to 6.2 percent.

Related: What Does High Unemployment Have to Do with Your Investments?

5. Foreign automobiles and recession: April 1960 to February 1961

In the late 1950s, Americans adopted a growing interest in foreign cars, which was incredibly detrimental to the U.S. auto industry. This new fascination, combined with rising interest rates designated by the Federal Reserve, caused a recession.

Related: 72% of Economists Predict a Recession Next Year — If We’re Not Already in One

6. The oil embargo: November 1973 to March 1975

In 1973 the Organization of Petroleum Exporting Countries imposed an oil embargo that caused gas prices to soar. This kicked off a spending cut by Americans to save money. This, combined with inflation, wage freezes, and layoffs, caused a stagnant economy and unemployment to rise to 8.8 percent.

7. The double dip recession: July 1981 to November 1982

There was a very short-term recession due to an energy crisis just before 1980, but this was much more detrimental. This recession was caused by the inconsistent and low levels of oil exports, which caused prices to surge.

During this time, interest rates were not raised enough to slow down the rate of inflation until the Federal Reserve hiked rates to 21.5 percent. The spike created a ripple effect and drove statistics to a labor force with over 10 percent unemployed workers.

8. 9/11 and the dot com crash: March 2001 to November 2001

In the late 1990s, the Internet burst onto the scene, and many investors put everything into their new dot com ventures. Because of this, unestablished businesses were inflated to unsustainable levels, and the bubble burst in 2001.

The dot com crash, combined with 9/11 and several corporate scandals, caused the first recession of the new millennium.

9. The Great Recession: December 2007 to June 2009

The Great Recession is the biggest financial collapse since the Great Depression. The heavy investments caused financial institutions to put into the mortgage market, specifically mortgage-backed securities.

However, homeowners lost their homes, and investment banks collapsed when people defaulted on their loans. During this time, the stock market crashed, people lost their retirement funds, and 10 percent of Americans were unemployed people. The government had to pump $1.5 trillion worth of stimulus money into the economy to correct this mess.

10. The COVID-19 recession: February 2020 to April 2020

When the COVID-19 pandemic hit, the world faced a financial crisis. With lockdowns, job losses, and a massive decline in consumer activity, the economy lost 20.5 million jobs, and unemployment surged to 14.7 percent.

The government quickly stepped in with stimulus money, approving $6 trillion in relief.

Related: We Might Be Headed Toward a Recession, But a ‘Bigger Catastrophe’ Could Be on The Horizon

What cyclical unemployment means for you

Cyclical unemployment is the percentage of people without work during an economic cycle that generally predicts a recession. Throughout history, there have been multiple recessions that have caused unemployment rates to fluctuate.

When cyclical unemployment happens, the government often uses a stimulus package to help boost the economy back into a more positive cycle.

Now that you’ve seen causes and trends throughout history, you might be able to identify signs of cyclical unemployment in the present-day economy.

For the most up-to-date information on the economy, finance, and the state of the workforce, visit Entrepreneur today.

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10 Things Every Working Woman Should Do This Year

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Opinions expressed by Entrepreneur contributors are their own.

Self-care has become an all-encompassing term that has strayed from the importance of everyday commodities that keep us in good health and spirits. Though pampering and “treat yourself” moments still have value, here are ten ways to invest in yourself to produce long-lasting, positive results.

Related: 8 Self-Care Tips From Wildly Successful Entrepreneurs

1. Put money into a 401(k)

It’s never too early (or too late!) to start saving for the future. Depending on your employment status, there are different retirement savings accounts. 401(k)s are the most common since these are employer-sponsored and often come with an employer match. However, freelancers also have options, such as a SEP-IRA or a high-yield savings account, to put away extra, tax-free dollars for retirement.

2. Schedule a health checkup

Self-care first includes taking care of your physical health. It’s easy to discredit regular checkups when you’re feeling healthy, but make this the year to get your blood work done. It creates a baseline for your health to identify areas needing improvement or extra attention.

Also, choose areas in your life where you can make small changes. Improving your health doesn’t always mean a drastic overhaul; it may be as simple as drinking more water or adding an extra 30 minutes of exercise to your day.

Related: 3 Key Tips for Optimizing Your Physical Health as an Entrepreneur

3. Review health insurance benefits

Many people with health insurance aren’t sure exactly what it does and doesn’t cover. If you’re unsure, talk with your HR representative or your health insurance provider to get an overview of deductibles, co-payments and other supplemental benefits you may not be aware of. Then, decide if the health care plan makes sense for your current lifestyle.

Are you paying for benefits you don’t use, or do you need additional benefits that aren’t covered? Selecting the right plan will help ensure you have what you need without paying the extra expense for anything you don’t.

4. Ignite your curiosity

Maintaining healthy cognitive functions through new pursuits gives a boost to the brain. Get curious and find what speaks to you. This can be anything from exploring local museums, embarking on different hiking trails, learning a new language or reading more books.

There’s no limit to what you can do, and these activities can ignite more creativity and motivation in your work. While it may be helpful to look to others for inspiration, make them enjoyable so you’ll want to make them a regular occurrence.

5. Prioritize mental health

Mental health has been at the forefront of people’s lives over the past few years, as many have experienced burnout. We often equate productivity with a value that drives us to go beyond our means and leads to anxiety, stress and depression. Take note of your everyday stressors and see how to reduce or eliminate them. Then, replace them with relaxing outlets that allow you to recharge.

There are various ways to prioritize mental health, from practicing positive self-talk to meditation to scheduling an electronics-free day. You may have to try different solutions before you find one that fits.

Related: 5 Ways to Protect Your Mental Health as an Entrepreneur

6. Implement good sleep habits

Consistent sleep is one of the essential factors of good health but one that is often overlooked. For many, it can be challenging to wind down from the workday. Therefore, you must “train” your body to prepare for sleep by getting into a nighttime routine.

Create a sanctuary for yourself to improve your sleep habits. Enjoy a soothing cup of herbal tea, perform a skincare routine, and snuggle in with a good book rather than scrolling through your phone. Additionally, ensure your bedroom is dark and cool for ideal sleep comfort and turn on soothing sounds if it helps lull you to sleep.

7. Try something new

What have you wanted to try but have always held back? Maybe it’s public speaking or contributing to a blog. Whatever “new” has been on your to-do, make a plan, schedule it on your calendar and go for it. It’s common to hold back from these activities due to fear of the unknown or failure, but trying new things helps create confidence and can be the catalyst you need to push you to the next level.

8. Learn to set boundaries

Boundary setting is crucial to relationships yet can be difficult to master. It doesn’t always involve simply saying no to people’s requests. Instead, it requires protecting your own values when people violate them. Setting boundaries may mean spending less time with certain people, removing yourself from toxic situations, or declining invites to events that don’t improve your life. Explore areas where boundaries will help you grow, and keep in mind growth itself is a work in progress.

Related: How to Set Boundaries to Build Thriving Relationships

9. Spend quality time alone

Learning how to enjoy time spent alone is a valuable gift. We are inundated by a false sense of connection through the internet, which often makes us feel lonelier than ever. Then, we overschedule our calendars to make up for human connections, only to feel drained afterward. Slow it down and plan a few solo dates a month to see how it feels to be truly present with yourself.

For those who aren’t used to spending quality time alone, it can feel awkward and uncomfortable initially, but these stem from your own perceptions. Take in a matinee, sit in a coffee shop and read, or enjoy a concert or event you’ve wanted to attend. Alone time has been linked to improved stress management and greater life satisfaction, so it’s worth trying to give yourself more time.

Related: Turns Out, Those Who Like Being Alone Can Be More Creative

10. Get active

Getting active can take on several directions. It can be physical, emotional or spiritual. The point is to engage with people and pursuits that feed your soul. Whether volunteering within your community, setting yourself an exercise goal, or learning more about personal development, there are endless ways to get active and invest in yourself this year.

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Are You a Winner? How to Truly Define Winning in Your Business

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Businesses gauge their performance typically with dozens of goals and metrics. But you can’t do everything at once. The challenge is to get people focused on the one thing that’s most important right now. If it moved in the right direction, it would eliminate a weakness (or capitalize on an opportunity) and improve financial outcomes. You improve that, and you win.

However, not every company clearly defines winning. A catalog of goals can pull the organization in multiple directions and stretch finite resources. Numerous goals can inherently be at odds, working against each other and for conflicting purposes. For example, a cost reduction goal might undermine an innovation goal requiring a significant investment.

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Gen Z Is Making Ugg Boots Fashionable Again: Report

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Ugg boots, the furry, sheepskin boots that defined the 2000s are back, apparently, with spiking interest and Gen Z cachet, according to data from shopping website, Lyst.

The site’s annual quarterly report that highlights the “hottest” 20 fashion brands was released on Thursday, and, as Insider noted, Ugg is on it for the first time since the index began in 2017.

“Gen Z shoppers are breathing new life into once dormant brands … with over 1.2 billion mentions on TikTok — Ugg’s influence is undeniable,” the report notes.

The boots were also sold out of stores during the holidays, it added.

Generation Z, or people born between 1997 and 2012, has demonstrated a penchant for bringing back old technology and trends, from flip phones to “vintage” headphones with cords.

But Ugg boots go back much further — the word “ugg” is actually a general term in Australia that means boots made from sheepskin and fleece, according to the BBC.

The company that created the “UGG” boot, Deckers Outdoor Corporation, is based in the U.S. and has tried and failed to trademark the word in Australia (where a court decided it was a generic word and thus could not be trademarked), the outlet added.

The company says the boots began to gain popularity in California in the 1980s. They were first featured on Oprah’s Favorite Things in 2000 (a huge brand-maker back then) and became “cherished commodities” early in the decade, according to Vogue.

The boots later gained prominence again with a fashion movement that prioritized “ugly” clothes, and have since become an unironic Gen Z favorite, per Insider. Kylie Jenner was also spotted wearing them in November.

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