Cyclical Unemployment: How to Stay Relevant During an Economic Downturn

When a business grows, it must 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 longer, it tends to become structural, meaning that people's skills don’t match the available jobs. 

There are unique challenges that come with any period of higher unemployment rates, but there are actions you can take. Let’s go over 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 labour 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. It 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 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 affects specific industries when the demand for a particular industry’s product or service drops significantly. In India, cyclical unemployment is less of a factor as it is generally found more often in capitalist economies [1].

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. 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. Here's a list of important skills across many professions: 

• Project management

• Data analysis 

• Data engineering

• IT

• UX design

• Marketing

• Customer service

• Writing

Identify transferable skills.

You can take transferable skills from job to job, such as critical thinking, communication, and management. They have more to do with how you complete your work and work with others—also known as interpersonal skills. 

Applying to a new job or changing careers requires identifying the transferable skills you will bring to a new role.

2. Consider earning a relevant qualification.

As part of your skills development, consider earning a relevant qualification, 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, such as data analytics, project management, business, sales, and marketing. 

3. Diversify your income stream. 

In 2022, roughly 70 per cent of young people in India had a second income stream in addition to their main job [2], and 1 per cent of IT workers also had a side hustle [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, develop important skills that feedback into your main role, and earn extra money. 

4. Look for in-demand jobs.

Find jobs in high demand, such as blockchain developers, healthcare recruiters, project managers, and sustainability managers. Remember that markets may shift based on the changing needs of the economy. 

Explore further 

Improve 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.