cyclical unemployment

Examples of cyclical unemployment in the following topics:

• Types of Unemployment: Frictional, Structural, Cyclical

  • Structural unemployment is one of the main types of unemployment within an economic system.
  • It is often impacted by persistent cyclical unemployment.
  • Frictional unemployment is another type of unemployment within an economy.
  • Cyclical unemployment is a type of unemployment that occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work.
  • With cyclical unemployment the number of unemployed workers is greater that the number of job vacancies.

• Reasons for Unemployment

  • There are three reasons for unemployment which are categorizes as frictional, structural, and cyclical unemployment.
  • There are four types of unemployment.
  • There is always at least some frictional unemployment in an economy, so the level of involuntary unemployment is properly the unemployment rate minus the rate of frictional unemployment.
  • During periods in the business cycle when the economy is producing below its long-run, optimum level, firms demand fewer workers and the result is cyclical unemployment.
  • The short-term fluctuations in the graph are the result of cyclical unemployment that changes when economic activity is above or below its long-term potential.

• Employment Levels

  • Employment level, as defined by cyclical, structural and frictional unemployment, is one of the most important economic indicators.
  • Full employment, in macroeconomics, is the level of employment rates when there is no cyclical unemployment.
  • It is defined by the majority of mainstream economists as being an acceptable level of natural unemployment above 0%, the discrepancy from 0% being due to non-cyclical types of unemployment.
  • There are three important categories of unemployment levels that should be understood in order to evaluate the effect of employment levels on overall economic performance: cyclical unemployment, structural unemployment, and frictional unemployment.
  • Cyclical unemployment occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work.

• Defining Full Employment

  • Full employment is defined as an acceptable level of unemployment somewhere above 0%; there is no cyclical or deficient-demand unemployment.
  • In macroeconomics, full employment is the level of employment rates where there is no cyclical or deficient-demand unemployment.
  • Ideal unemployment excludes types of unemployment where labor-market inefficiency is reflected.
  • The full employment unemployment rate is also referred to as "natural" unemployment.
  • Full employment is defined as "ideal" unemployment.

• Measuring the Unemployment Rate

  • Cyclical unemployment: occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work.
  • The unemployment rate is measured using two different labor force surveys.
  • The survey measures the unemployment rate based on the ILO definition.
  • The unemployment rate is updated on a monthly basis.
  • They calculate different aspects of unemployment.

• Typical Lengths of Unemployment

  • Long-term unemployment lasts 27 or more weeks.
  • Generally, unemployment is high during recessions.
  • Cyclical: occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work.
  • Short-term unemployment is considered any unemployment period that lasts less than 27 weeks.
  • Long-term unemployment is classified as unemployment that lasts for 27 weeks or longer.

• The Disadvantages of Mixed Economies

  • Marxian socialists argue that because social democratic programs retain the capitalist mode of production they also retain the fundamental issues of capitalism, including cyclical fluctuations, exploitation and alienation.
  • Social democratic programs intended to ameliorate capitalism, such as unemployment benefits or taxation on profits and the wealthy, create contradictions of their own through limiting the efficiency of the capitalist system by reducing incentives for capitalists to invest in production.
  • For example, attempts to reduce unemployment too much would result in inflation, and too much job security would erode labor discipline.

• Defining Unemployment

  • Cyclical: occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work.
  • It differs from frictional unemployment because it lasts longer.
  • Hidden: the unemployment of potential workers that is not taken into account in official unemployment statistics because of how the data is collected.
  • The final measurement is called the rate of unemployment .
  • The effects of unemployment can be broken down into three types:

• Effect of a Government Budget Deficit on Investment and Equilibrium

  • A cyclical deficit is a deficit incurred due to the ups and downs of a business cycle.
  • At the lowest point in the business cycle, there is a high level of unemployment.
  • Conversely, at the peak of the cycle, unemployment is low, increasing tax revenue and decreasing spending, which leads to a budget surplus.
  • The additional borrowing required at the low point of the cycle is the cyclical deficit.
  • By definition, the cyclical deficit will be entirely repaid by a cyclical surplus at the peak of the cycle.

• The Social Problem

  • New social problems emerged from industrialization, threatening to increase unemployment, poverty, and unequal distribution of wealth.
  • Progress and Poverty: An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth was written by Henry George in 1879 and is a treatise on the cyclical nature of an industrial economy and its remedies.
  • In other words, the better the public services, the higher the rent is (as more people value that land).The tendency of speculators to increase the price of land faster than wealth can be produced to pay results in lowering the amount of wealth left over for labor to claim in wages, and finally leads to the collapse of enterprises at the margin, with a ripple effect that becomes a serious business depression entailing widespread unemployment, foreclosures, etc.
  • In Progress and Poverty, George examines various proposed strategies to prevent business depressions, unemployment, and poverty, but finds them unsatisfactory.