Explain cyclical unemployment and give examples
Cyclical unemployment is a type of unemployment that is caused by fluctuations in the business cycle, specifically during periods of economic recession or depression. When the economy is experiencing a downturn, overall demand for goods and services decreases, leading to companies reducing their production and laying off workers. This results in a higher level of unemployment as people are unable to find work due to a lack of available jobs.
Examples of cyclical unemployment include:
1. During the 2008 financial crisis, many industries such as construction, manufacturing, and finance experienced a sharp decline in demand, resulting in widespread layoffs and increased unemployment rates.
2. The COVID-19 pandemic in 2020 led to a global economic downturn, causing businesses to shut down and lay off workers due to restrictions on movement and decreased consumer spending.
3. The Great Depression in the 1930s saw a prolonged period of high cyclical unemployment as businesses collapsed, leading to massive job losses and a prolonged economic downturn.
4. The dot-com bubble burst in the early 2000s resulted in many technology companies laying off workers and reducing their workforce as the demand for tech products and services dropped.