Cyclical Unemployment: How to Stay Relevant During an Economic Downturn

Written by Coursera Staff • Updated on

Learn what you can do when a company begins reducing hiring or instituting layoffs as a result of a slowing economy.

[Featured image] A young Asian woman holding a tablet stands in an empty office.

Cyclical unemployment typically arises during economic downturns, like a recession. It refers to a period of short-term unemployment that occurs when businesses reduce their workforce to adjust to shrinking economic demand.

Learn more about cyclical unemployment, how long it tends to last, and what you can do to stay relevant in your current role or prepare yourself for any challenges you may face in finding a new one.

What is cyclical unemployment? 

Cyclical unemployment is a relatively short period of higher unemployment that results from an economic slowdown. During a slowdown, consumers do not purchase as much, leading businesses to reduce their overall labor expenditures in an attempt to address a decline in growth or productivity. This may look like a hiring freeze or instituting layoffs.

When unemployment rises, it may be harder to find new opportunities because there may be fewer available roles and more people applying to them. 

How does cyclical unemployment differ from structural unemployment?

Cyclical unemployment lasts anywhere from one month to one year [1]. When that initial period continues for a longer period of time, it tends to become structural, meaning that the skills people have don’t match the available jobs. 

Recovery from cyclical unemployment depends on the economy rebounding, which can happen for a number of reasons, such as consumer spending rising, interest rates decreasing, or the government instituting programs to curb unemployment. Even still, when the economy starts to rebound, it may not lead to an immediate decrease in cyclical unemployment. Instead, companies may ask more from their current employees rather than focus on hiring until it’s clear how much consumer spending has stabilized.    

How does cyclical unemployment affect the job market?

During a period of cyclical unemployment, companies tend to reduce hiring and even conduct layoffs. As a result, it may become harder to find a job if you've experienced a reduction in force (RIF), or you may find it difficult to switch jobs if you're currently employed but would like to find something else. It can also take longer to secure a new position. Lastly, there's a higher likelihood of competition for jobs because more people will be applying for them.

Cyclical unemployment also tends to affect specific industries. When the demand for a particular industry’s product or service drops significantly, as the construction industry experienced during the housing crisis in 2008, it can have a sweeping impact on the entire workforce. Employment in the construction industry fell by 1.5 million jobs between 2007 and 2009, though that industry has since recovered [2]. Similarly, another cyclical unemployment example you might recognize is the spate of tech layoffs that began in late 2024 [3].

4 actions to take during cyclical unemployment

Whether you are concerned about your current role or have recently been laid off, there are actions you can take during a period of cyclical unemployment to strengthen your skill set and stay relevant. 

1. Expand your skill set.

Each role requires a particular set of job skills that usually include workplace, technical, and transferable skills. Learning new technical skills and identifying your transferable skills can help you stay responsive to the changing demands of the workforce. Let’s discuss each one in more detail:  

Build in-demand technical skills.

Some technical skills are more in demand than others, such as user experience (UX) and data analysis. Learn more about the eight skills in high demand at the moment. We’ve also compiled important skills for the professions outlined below: 

Identify and hone transferable skills.

Transferable skills are those you can take from job to job, such as critical thinking, communication, and management. They have more to do with how you complete your work and how you work with others—also known as interpersonal skills. Applying to a new job or changing careers often requires identifying the transferable skills you will bring to a new role.

Learn more: How to Feature and Format Key Skills on Your Resume

2. Consider earning a relevant credential.

As part of your skills development, you may want to consider earning a relevant credential, like a Professional Certificate, certification, or attending a boot camp to gain or improve certain job-ready skills. On Coursera, you’ll find Professional Certificates from Google, Microsoft, IBM, Amazon, and other industry leaders in a range of in-demand fields, such as data analytics, project management, business, sales, and marketing. 

3. Diversify your income stream. 

In August 2024, 5.1 percent of employed persons in the United States held multiple jobs [4]. If you’re concerned about the stability of your primary income stream, it may be worthwhile to explore additional opportunities you can do on the side. 

Taking on a side job, side hustle, or establishing a passive income stream can allow you to explore a passion, develop important skills that also support your main role, and earn extra money. Explore the lists below to see if there may be an income stream worth pursuing:

4. Look for in-demand jobs.

Find jobs that are in high demand, such as medical assistants, web developers, and financial managers. Keep in mind that demands may shift based on the changing needs of the economy, but the US Bureau of Labor Statistics regularly tracks jobs that are expected to grow faster than others and can be an excellent resource as you explore opportunities. For the most effective job search, stay up-to-date with current employment trends and industry demands.

Keep growing with Coursera 

Develop or advance your skill set with learning from industry leaders, like Google, IBM, and Microsoft, and esteemed university partners. There are many different ways to learn a new skill, strengthen an existing one, get comfortable with a new technology, or even invest in a personal passion. Join for free to get personalized recommendations about how to keep growing. 

Article sources

1. 

Reserve Bank of Australia. "Unemployment: Its Measures and Types, https://www.rba.gov.au/education/resources/explainers/unemployment-its-measurement-and-types.html." Accessed April 4, 2025.

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