Cyclical Unemployment

AAA

DEFINITION of 'Cyclical Unemployment'

A factor of overall unemployment that relates to the cyclical trends in growth and production that occur within the business cycle. When business cycles are at their peak, cyclical unemployment will be low because total economic output is being maximized. When economic output falls, as measured by the gross domestic product (GDP), the business cycle is low and cyclical unemployment will rise.

Economists describe cyclical unemployment as the result of businesses not having enough demand for labor to employ all those who are looking for work. The lack of employer demand comes from a lack of spending and consumption in the overall economy.

INVESTOPEDIA EXPLAINS 'Cyclical Unemployment'

Cyclical unemployment is one of five classes of unemployment as recognized by economists. Other types include structural, frictional, classical and Marxian. In most cases, several types of unemployment exist at the same time. With the exception of cyclical unemployment, the other classes can be occurring even at the peak ranges of business cycles, when the economy is said to be at or near "full employment".

VIDEO

Loading the player...
RELATED TERMS
  1. Structural Unemployment

    A longer-lasting form of unemployment caused by fundamental shifts ...
  2. Non-Accelerating Inflation Rate ...

    The specific level of unemployment that exists in an economy ...
  3. Pink Slip Party

    A party that brings together professionals and recruiters who ...
  4. Coincident Indicator

    A metric which shows the current state of economic activity within ...
  5. Full Employment

    A situation in which all available labor resources are being ...
  6. Discouraged Worker

    A person who is eligible for employment and is able to work, ...
RELATED FAQS
  1. Why does the efficient market hypothesis state that technical analysis is bunk?

    The efficient market hypothesis (EMH) suggests that markets are informationally efficient. This means that historical prices ... Read Full Answer >>
  2. How is free enterprise affected by monetary policy?

    Monetary policy is concerned with the quality, quantity and function of money instruments in an economy. Perhaps the best ... Read Full Answer >>
  3. How do you use a financial calculator to determine present value?

    Determining the present value of a given cash flow is based on the concept that money today is inherently worth more than ... Read Full Answer >>
  4. Who developed the theory of economic externality?

    British economist Arthur C. Pigou advanced the theory of economic externalities, which he most notably expressed in his book, ... Read Full Answer >>
  5. What are the most effective ways to reduce moral hazard?

    There are a number of ways to reduce moral hazard, including the offering of incentives, policies to prevent immoral behavior ... Read Full Answer >>
  6. What are the primary sources of market risk?

    Market risk is the risk of loss due to the factors that affect an entire market or asset class. Market risk is also known ... Read Full Answer >>
Related Articles
  1. Economics

    What Does Cyclical Unemployment Mean?

    Cyclical unemployment is the change in job availability due to upswings and downswings in the business cycle. When the economy is robust and booming, cyclical unemployment is at its lowest. When ...
  2. Economics

    Examining The Phillips Curve

    This model depicts an inverse relationship between unemployment and wage inflation, but is it accurate?
  3. Economics

    What You Need To Know About The Employment Report

    This widely watched indicator of economic well-being directly influences the market.
  4. Budgeting

    Are You Living Too Close To The Edge?

    If a missed paycheck will make your finances cave in, you must learn how to make proper supports.
  5. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  6. Economics

    The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.
  7. Economics

    What Is Supply?

    Supply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
  8. Economics

    What Part of the Money Supply is M2?

    M2 is the part of the money supply economists use to analyze and predict inflation.
  9. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  10. Economics

    Understanding Structural Unemployment

    Structural unemployment is an economic miss-match where workers fail to find jobs and employers with available jobs fail to find workers.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center