Which unemployment type is most likely to occur during economic contractions?

Cyclical unemployment is most likely to occur during economic contractions because it is directly linked to the business cycle. When the economy slows down, demand for goods and services decreases. As a result, businesses may reduce their production levels, leading to layoffs and a higher number of unemployed individuals seeking work. This type of unemployment rises during periods of economic decline and falls during expansions, making it closely tied to overall economic health.

In contrast, other types of unemployment, such as frictional unemployment, occur when individuals are temporarily between jobs or entering the workforce. This is a natural part of the job search process and does not necessarily spike during economic downturns. Hidden unemployment refers to individuals who are not actively seeking work but would take a job if available, while underemployment relates to workers being employed in roles that do not utilize their skills fully. Both hidden unemployment and underemployment do not directly align with the conditions that lead to cyclically rising unemployment during economic contractions.