- Definition: Cyclical unemployment occurs due to cyclical trends in the business cycle.
- Relation to Economic Slowdowns:
- When economic output (GDP) falls (slowdown/recession), the business cycle is low.
- During slowdowns, overall demand for labor declines.
- Businesses reduce hiring or lay off workers due to decreased demand.
- This causes cyclical unemployment to rise.
- It is a direct consequence of economic contractions.