Cyclical Unemployment: How to Stay Relevant During an Economic Downturn

When a business grows, it generally has to hire more employees to keep pace with demand. However, when business slows, the company may reduce the amount of staff it employs 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 people's skills 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. You’ll find unique challenges that come with any period of higher unemployment rates, but you can take action now to reduce negative consequences.  

You can explore the basics of cyclical unemployment, how long it will last, and what you can do to stay relevant in your current role or find 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 and can last anywhere from one month to 1.5 years. Recovery depends on the economy rebounding for various reasons. For example, consumers begin spending more, 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 lead to a gradual 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, it can have a sweeping impact on the entire workforce. For example, during the recession in 2008-2010, unemployment rose to 2.5 million. [1]. Similarly, Glassdoor UK 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 recently got laid off, you can take action 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. Some essential tech skills include: 

• Project management

• Data analysis 

• Data engineering

• IT

• UX design

• Marketing

• Customer service

• Writing

Identify transferable skills.

Transferable skills, such as critical thinking, communication, and management, can be transferred from job to job. These skills are more about how you complete your work and 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.

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: data analytics, project management, business, sales, and marketing. 

3. Diversify your income stream. 

A quarter of people in the UK have an additional income stream in addition to their primary job. [3]. If you’re concerned about the stability of your main 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 essential skills that will feed into your main role, and earn extra money. 

4. Look for in-demand jobs.

Find jobs experiencing high demand for workers, such as medical assistants, web developers, and financial managers. Remember that demands may shift based on the economy’s changing needs. 

Explore further. 

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.