Which type of unemployment results from economic downturns?

Cyclical unemployment arises specifically from economic downturns and is directly linked to the fluctuations in the business cycle. During periods of recession, demand for goods and services decreases, leading to a reduction in production and ultimately resulting in layoffs. Companies may respond to falling demand by cutting jobs, which increases the unemployment rate. It reflects the inability of the economy to provide enough jobs for those who are willing to work.

In contrast, structural unemployment is related to long-term changes in the economy that affect specific industries or sectors, often due to technology or shifts in consumer preferences. Seasonal unemployment is temporary and occurs when industries slow or shut down for a season, reflecting predictable and regular changes in employment patterns. Frictional unemployment involves short-term job transitions, such as when individuals voluntarily move between jobs or enter the workforce for the first time.

Understanding cyclical unemployment helps to identify how macroeconomic factors—like a recession—impact job availability, distinguishing it from other types of unemployment driven by factors unrelated to the economy's current health.