In the Case in Point entitled "Might Increased Structural Unemployment Explain the 'Jobless Recovery' Following the 2001 Recession," economists Erica Goshen and Simon Potter note that when a layoff is temporary, the employer "suspends" the job, due to slack demand, and the employee expects to be recalled once demand picks up. With a permanent layoff, the employer eliminates the job. Which of the following statements is consistent with their observations?

Question

Quizplus · Accepted Answer

According to the economists, temporary layoffs are due to cyclical changes in demand and are expected to be reversed once demand picks up. This means that temporary layoffs are likely to create cyclical unemployment. On the other hand, permanent layoffs involve an elimination of the job and are therefore more likely to create structural unemployment. So, the statement that temporary layoffs create cyclical unemployment while permanent layoffs create structural unemployment is consistent with their observations.

In the Case in Point Entitled "Might Increased Structural Unemployment