Final answer:
Businesses typically hire more labor when they anticipate business expansion and increased demand, shown by a rightward shift in the labor demand curve. They are cautious during recessions, possibly using overtime to cope with uncertainty. Cyclical unemployment fluctuates with the business cycle, affecting wages and labor demand.
Step-by-step explanation:
Businesses typically decide to hire more labor when they perceive that the economy is expanding, and there is an increased demand for their product or service. This belief prompts firms to hire more workers as the labor demand curve shifts to the right. However, during the beginnings of a recession, firms might initially retain workers to avoid the costs of later recruiting, hiring, and training new employees. They will generally wait to see if the economic improvement is lasting before committing to expand their workforce, sometimes opting for overtime work as a temporary solution. It's crucial to understand that cyclical unemployment is a variation in unemployment caused by the business cycle, as the economy moves from expansion to recession or vice-versa.
In practical terms, the level of unemployment can influence wages, where high unemployment can lead to lower wage acceptance, allowing businesses to maintain or increase profits without raising workers' wages. On the other hand, when labor is in high demand and unemployment is low, businesses may need to offer higher wages to attract the necessary workers.