Cyclical unemployment

exists when the overall demand for labor is low.As total spending and output fall, unemployment rises virtually everywhere. In the recession year 1982, the unemployment rate rose in 48 of the 50 states. This simultaneous rise in Employments in many markets signaled that the increased unemployment was largely cyclical Similarly, from the recessions’s trough in 1991 to the boom year of 2000, the unemployment rate fell in every state in the United States.

The distinction between cyclical, frictional, and structural unemployment helps economists diagnose the general health of the labor market. High levels of frictional or structural unemployment can occur even though the overall labor market is in balance, for example, when turnover is high or when high minimum wages price certain groups out the labor force. Cyclical unemployment occurs during recessions, when employment falls as a result of an imbalance between aggregate supply and demand.

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