Cyclical Unemployment: How to Stay Relevant During an Economic Downturn

When a business grows, typically, it has to hire more employees to keep up with demand. However, when a business slows down, it may reduce the staff it hires or even conduct layoffs. Cyclical unemployment refers to the latter scenario. It’s a period of short-term unemployment tied closely to an economic slowdown, like a recession. When that initial unemployment lasts for a longer period, it tends to become structural, meaning that the skills people have don’t match the available jobs. 

A growing number of tech companies have instituted layoffs recently in response to the slowing economy, which has sparked concerns about an upcoming phase of cyclical unemployment. 

Unique challenges come with any period of higher unemployment rates, but you can take action to help yourself. Let’s discuss cyclical unemployment, how long it tends to last, and what you can do to stay relevant in your current role or as you set about finding a new one.  

What is cyclical unemployment? 

Cyclical unemployment is a short period of higher unemployment that results from an economic slowdown. In a slowdown, consumers do not purchase as much, leading businesses to reduce their overall labor expenditures to address a decline in growth or productivity.

Every economy has some amount of unemployment. When unemployment is low (sometimes known as a “tight labour market”), workers may have greater power because their services are in high demand. However, 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 long does cyclical unemployment last?

Compared to structural unemployment, cyclical unemployment is typically shorter and can last anywhere from one month to 1.5 years. Recovery depends on the economy rebounding for several reasons. For example, consumers begin spending more, and demand rises, interest rates decrease, or the government institutes programs to curb unemployment.   

How does cyclical unemployment affect the job market?

During a period of cyclical unemployment, companies tend to reduce hiring and even conduct layoffs. When the economy starts to rebound, it may not lead to an immediate decrease in unemployment. Instead, companies may ask more from their current employees rather than focus on hiring until it’s clear how much consumer spending has increased.  

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[1]. Similarly, Glassdoor found that the number of open jobs for certain professions, such as receptionist, accountant, and event coordinator, decreased between 2020 and 2021 due to the COVID-19 pandemic [2]. 

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. Develop your skill set.

Each role requires a particular set of job skills, including workplace, technical, and transferable skills. Learning new technical skills and identifying your transferable skills can help.

Build in-demand technical skills.

Some technical skills are more in demand than others, such as user experience (UX) and data analysis. Research those that employers look for most often in your field.

Identify transferable skills.

Transferable skills are those you can take from job to job, such as critical thinking, communication, and management. They are more about how you complete your work and work with others—they are 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.

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, or attending a bootcamp to gain or improve your job-ready skills. On Coursera, you’ll find Professional Certificates from Google, Meta, IBM, Salesforce, and other industry leaders in various fields: data analytics, project management, business, sales, and marketing. 

3. Diversify your income stream. 

Approximately 22 per cent of Canadians have a side hustle, and a further 60 percent are considering it [3]. If you’re concerned about the stability of your primary income stream, exploring additional opportunities you can do on the side may be worthwhile. 

Taking on a side job, side hustle, or establishing a passive income stream can allow you to explore a passion. You can develop important skills that feed back into your main role and earn extra money. 

4. Look for in-demand jobs.

Find jobs in high demand, such as medical assistants, web developers, and financial managers. Remember that demands may shift based on the economy's changing needs, but Statistics Canada tracks job vacancies and labour motility and can be an excellent resource as you explore opportunities. 

Explore further with Coursera.

Brush up on your interview skills by enrolling in Advanced Interviewing Techniques from the University of Maryland on Coursera, or explore what you need to build a strong Indeed or LinkedIn profile with one of Coursera’s Guided Projects.

You can also build in-demand skills for lucrative careers in project management, UX design, data science, marketing analytics, and sales by earning a Professional Certificate from leading companies like Google, Meta, and IBM, all available on Coursera.