During the GFC the American workers who suffered the most were those without a high school diploma – their unemployment rate was 15.6% in the summer of 2009 more than three times the peak unemployment rate for college graduates – refers to cyclical unemployment. Furthermore this particular group of unemployed were also those that found it hardest to get back into employment. However by July this year the Labour Department recorded that the unemployment rate for those without a high school diploma fell to 5.1 percent in July this year. This is surprising considering that low-skilled workers, who makeup 7.2% fo the labour force, were seen as the least likely to recover from a recession
Cyclical unemployment (or demand deficient) occurs when there is not enough demand to employ all those who want to work. It is a type that Keynesian economists focus on particularly, as they believe it happens when there is a disequilibrium in the economy. It is also often known as cyclical unemployment because it will vary with the trade cycle. When the economy is booming, there will be lots of demand and so firms will be employing large numbers of workers. Demand-deficient unemployment will at this stage of the cycle be fairly low. If the economy slows down, then demand will begin to fall. When this happens firms will begin to lay workers off as they do not need to produce so much. Demand-deficient unemployment rises. The behaviour of demand-deficient unemployment will exactly mirror the trade cycle.
The increasing trade war between the USA and China seems to have done little to put a damper on hiring. The manufacturing sector, which is particularly sensitive to exports, was robust, adding 37,000 jobs.
Source: New York Times – 2nd August 2018