Final answer:
In a recession, cyclical unemployment is rising. It is associated with the economic cycle where less hiring occurs below potential GDP. The natural rate of unemployment persists even in a healthy economy, encompassing frictional and structural unemployment.
Step-by-step explanation:
In a recession, cyclical unemployment is rising due to fluctuations in the business cycle. During such times, the economy is producing below its potential GDP, which means there is less incentive for employers to hire, leading to an increase in unemployment.
Conversely, when the economy is at or above potential GDP, we can expect cyclical unemployment to be minimal or zero. However, even in strong economic times, there is still unemployment due to factors such as job seekers and employers taking time to find the right match, which is referred to as frictional unemployment, and this is not necessarily a 'bad' thing.
The remaining level of unemployment that occurs when the economy is healthy, including both frictional and structural unemployment, is known as the natural rate of unemployment. This represents the unavoidable baseline level of unemployment that exists in an economy due to various economic, social, and political factors.