US Unemployment Cycle and Potential Recession

By Raulin Cadet | Published Sept. 12, 2024 | Updated Sept. 13, 2024 | Topics: USA, Employment, Unemployment, Recession, Economic cycle

"The only thing we have to fear is fear itself."

 – Franklin D. Roosevelt

Some economists think that a recession has started in the US economy, whereas some others disagree. Why should we think about a potential recession, considering the unemployment rate cycle? The unemployment rate often follows a cyclical pattern, due to the economic cycle.

Definition: In sample words, the economic cycle is the fluctuation of economic activity, moving from a period of growth, known as expansion, to a period of contraction, known as recession. During expansion, the unemployment rate typically decreases because businesses require more workers to meet increasing demand. On the other hand, during a recession, the economy contracts, leading to higher unemployment as businesses cut back on production and lay off workers.

The graphic of this post shows the last cycles of unemployment. The peaks, which are the highest unemployment rate of each cycle, are shown with red points. For each cycle, one can see the increasing phase of the unemployment rate and the decreasing phase. The rising unemployment rate often signals a recession. The graphic shows that the unemployment rate has been increasing in recent months, suggesting a potential beginning of a recession. However, this trend might reverse in the coming months, or it could continue to rise. While some institutions may forecast the probability of a recession, predicting with certainty whether it will occur is difficult.

When a recession occurs, maintaining a calm mindset can help in addressing the challenges of the period with creativity.