Here are two potential causes of unemployment:
- Structural unemployment: This happens when job seekers' abilities and available job requirements are not compatible. This can occur when technological advancements make certain positions obsolete or when there is a shift in demand for specific types of work, leaving workers with outdated skills unemployed.
- Cyclical unemployment: This type of unemployment results from changes in the business cycle, where the economy experiences periods of growth and decline. During recessions or downturns, firms may decrease production and lay off employees to decrease expenses, resulting in an increase in cyclical unemployment.