Unemployment doesn’t cause economic downturn.
Oner n.d. — Ceyda Oner, deputy division chief in the IMF’s Finance Department, no date (“Unemployment: The Curse of Joblessness,” no date, International Monetary Fund, Available Online at https://www.imf.org/external/pubs/ft/fandd/basics/32-unemployment.htm, Accessed 06-28-2023)
But unemployment does not fall in lockstep with an increase in growth. It is more common for businesses to first try to recover from a downturn by having the same number of employees do more work or turn out more products—that is, to increase their productivity. Only as the recovery takes hold would businesses add workers. As a consequence, unemployment may start to come down only well after an economic recovery begins. In fact, in the last three recessions, the unemployment rate continued to rise after the end of the recessions; a phenomenon called “jobless recoveries.”
The phenomenon works in reverse at the start of a downturn, when firms would rather reduce work hours, or impose some pay cuts before they let workers go. Unemployment starts rising only if the downturn is prolonged. Because unemployment follows growth with a delay, it is called a lagging indicator of economic activity.