UNEMPLOYMENT Pick an industry that typically has strong cyclical (peaks when the economy is strong) or...

UNEMPLOYMENT
Pick an industry that typically has strong cyclical (peaks when the economy is strong) or counter-cyclical (peaks when the economy is weak) employment. Find an online article that supports your identification of the industry. Why do you suppose this industry has cyclical (or counter-cyclical) employment?

Example: The Secondary Education Industry has a strong COUNTER-Cyclical employment relationship. When the economy is very strong, individuals enter the workforce directly and bypass education. However, when the economy is weak and people lose their job, employers have the ability to pick from a wider applicant pool. As a result, individuals want to INCREASE their employability and get a degree. When individuals choose to go to school, the schools must hire additional instructors and support staff to educate a larger enrolled population. As a result, the employment in higher education is COUNTER-CYCLICAL. This is what is meant by labor is a “derived” demand. Firms (or colleges) will only hire based on the amount of the product they expect to produce (in this case students to educate).

Expert Solution

When an economy contracts, a business downturn is experienced. Output contracts and employment falls. As employment falls, income of the people falls since they are now jobless. Thus, their disposable income also falls which means they will demand less goods. The producers producing these goods will face shortage of demand and adjust to it by cutting down production and laying off workers. Thus, unemployment rises further. This is what is known as cyclical unemployment.

Unemployment is counter cyclical if it falls when the economy contracts. Healthcare for instance. Consider people being laid off from work during economic crunch. The agony of the people in view of losing their jobs causes several illness. Which also means that they will have to spend more on healthcare so that they are fit to work and can search jobs faster. Here, even if the economy is crunching, it is the healthcare sector that gets a boost. Thus, unemployment in healthcare industry is counter cyclical.

Rahul Sunny answered 1 year ago

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