Cyclical Unemployment

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Definition of 'Cyclical Unemployment'

Cyclical unemployment occurs when there is a mismatch between the skills of workers and the jobs available. This can happen when the economy is in a recession, as there are fewer jobs available overall. It can also happen when there are changes in the economy, such as when a new technology is introduced that makes some workers' skills obsolete.

Cyclical unemployment is often caused by a decline in demand for goods and services. When businesses are not doing well, they may lay off workers. This can lead to a decrease in consumer spending, which can further hurt businesses and lead to more layoffs.

Cyclical unemployment can also be caused by changes in government policy. For example, if the government increases taxes, businesses may have less money to invest and may lay off workers.

Cyclical unemployment is a temporary phenomenon that is usually associated with economic downturns. When the economy recovers, cyclical unemployment typically declines.

There are a number of policies that can be used to reduce cyclical unemployment. These include:

* Government spending can help to boost the economy and create jobs.
* Tax cuts can also help to stimulate the economy and create jobs.
* Trade policies can be used to protect domestic industries from foreign competition.
* Education and training programs can help workers to develop the skills they need to find jobs.

Cyclical unemployment can have a number of negative consequences for individuals and the economy as a whole. For individuals, cyclical unemployment can lead to financial hardship, stress, and even depression. For the economy, cyclical unemployment can lead to a decline in output, investment, and economic growth.

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