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Cyclical or 
demand-
deficient
It has been the experience of the past that domestic and foreign trade go through 
cycles of boom, decline, recession, recovery, then boom again, and so on. 
(a) During recovery and boom years, the demand for output and jobs is high, and 
unemployment is low. 
(b) During decline and recession years, the demand for output and jobs falls, and 
unemployment rises to a high level. 
Cyclical unemployment can be long term, and a government might try to reduce it by 
doing what it can to minimise a recession or to encourage faster economic growth. 
Seasonal employment and frictional unemployment will be short term. Structural unemployment, 
technological unemployment and cyclical unemployment are all longer term, and more serious. 
6.4 Government employment policies
Job creation and reducing unemployment should often mean the same thing, but it is possible to create 
more jobs without reducing unemployment. 
(a) 
This can happen when there is a greater number of people entering the jobs market than there 
are new jobs being created. For example, if 500,000 new jobs are created during the course of 
one year, but 750,000 extra school leavers are looking for jobs, there will be an increase in 
unemployment of 250,000. 
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CHAPTER 3
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THE MACROECONOMIC ENVIRONMENT 
 
69 
(b) 
It is also possible to reduce the official unemployment figures without creating jobs. For example, 
individuals who enrol for a government-financed training scheme are taken off the unemployment 
register, even though they do not have full-time jobs. 
A government can try several options to create jobs or reduce unemployment. 
(a) 
Spending more money directly on jobs
(for example hiring more civil servants) 
(b)