Cyclical unemployment: How to stay relevant during an economic downturn

When a company grows, it usually needs to hire more employees to keep up with demand. However, if business slows down, the company may hire fewer staff or even make redundancies. Cyclical unemployment refers to the latter scenario. This is a period of short-term unemployment that is closely linked to an economic slowdown, such as a recession. If this initial unemployment persists over a longer period of time, it tends to become structural, i.e. people's skills do not match the jobs available.

A growing number of technology companies have recently made layoffs in response to the slowing economy, raising concerns about an impending period of cyclical unemployment. Each period of higher unemployment comes with unique challenges, but there are steps you can take.

Below, you'll learn more about cyclical unemployment, how long it typically lasts, and what you can do to stay relevant in your current position or when looking for a new one.

What is cyclical unemployment?

Cyclical unemployment is a short period of higher unemployment resulting from an economic downturn. During an economic downturn, consumers buy less, which causes companies to reduce their overall labor expenditures to counteract a decline in growth or productivity.  

In every economy, there is some level of unemployment. When unemployment is low (what is sometimes called a "tight labor market"), workers may have more power because their services are in high demand. However, when unemployment rises, it can be more difficult to find new jobs because there are fewer positions available and more people applying for those jobs.

How long does cyclical unemployment last?

Compared to structural unemployment, cyclical unemployment is generally shorter. It can last between one month and 1.5 years. The recovery depends on the economy picking up again for various reasons. For example, if consumers spend more and demand increases, if interest rates fall or if the government introduces programs to curb unemployment.  

How does cyclical unemployment affect the labor market?

During a period of cyclical unemployment, companies tend to reduce recruitment and even make redundancies. When the economy recovers, this does not necessarily lead to an immediate drop in unemployment. Instead, companies may ask for more from their current employees instead of focusing on hiring until it is clear how much consumer spending has increased.  

Cyclical unemployment also tends to affect certain industries. When demand for a particular industry's products or services drops significantly, as was the case in construction during the 2008 housing crisis, it can have far-reaching effects on the entire workforce.

4 Measures during cyclical unemployment

Whether you're worried about your current position or have recently been laid off, there are steps you can take during a period of economic unemployment to improve your skills and stay relevant.

1. Develop your skills.

Each role requires a specific set of job skills, which typically include job-related, technical and transferable skills. Learning new technical skills and identifying your transferable skills can help you achieve this. Let's take a closer look at each aspect:  
Acquire in-demand technical skills.

Some technical skills are more in demand than others, such as user experience (UX) and data analytics. Find out more about the seven skills that are currently most in demand. We have also compiled important skills for the professions listed below:

• Project management
• Data analysis
• Data technology
• IT
• UX design
• Marketing (also automated)
• Customer support
• üWriting

2. Identify transferable skills.

Transferable skills are those that you can take with you from one job to another, such as critical thinking, communication and management. They have more to do with how you do your job and how you work with others - also known as interpersonal skills.

When you apply for a new job or want to change careers, you often need to find out what transferable skills you have for a new role.

3. consider acquiring a relevant certificate.

As part of your skills development, consider gaining a relevant qualification, such as a professional certificate, or attending a bootcamp to gain or improve your job-relevant skills. e.g. On Coursera, you can find professional certificates from Google, Meta, IBM, Salesforce and other industry leaders in a range of fields: Data Analytics, Project Management, Business, Sales and Marketing.

4. search for jobs in demand.

Look for jobs that are in high demand, such as medical assistants, web developers and financial managers. Keep in mind that demand can change depending on the changing needs of the economy.