Causes/types of unemployment: seasonal unemployment

Government and the Macro‑economy: Employment and Unemployment (Cambridge 0455)

Key Terms (AO1)

• Unemployment – Persons aged 16 + who are without work, are actively seeking work and are available to start work.
• Labour force – The sum of employed + unemployed persons.
• Unemployment rate – (Number of unemployed ÷ Labour force) × 100 %.
• Seasonal unemployment – Unemployment that recurs at regular intervals each year because the demand for labour varies with the season.
• Seasonal adjustment – A statistical technique that removes regular seasonal fluctuations from data so that underlying trends can be seen.
• Frictional unemployment – Short‑term unemployment while workers search for a new job that better matches their skills.
• Structural unemployment – Unemployment caused by a mismatch between workers’ skills (or location) and the needs of the economy.
• Cyclical (demand‑deficient) unemployment – Unemployment that results from insufficient aggregate demand in the economy.

Learning Objective (AO1‑AO3)

Explain the causes, measurement and consequences of seasonal unemployment and evaluate the effectiveness of policies designed to reduce it.

Definition of Unemployment & Unemployment Rate (Syllabus 4.6.1, 4.6.2)

Unemployment is measured through the **Labour‑Force Survey** (LFS). The unemployment rate is calculated as:

Unemployment rate = (Number of unemployed ÷ Labour force) × 100 %

Worked example: If the LFS records 2 000 unemployed people and a labour force of 20 000, the unemployment rate is (2 000 ÷ 20 000) × 100 % = 10 %.

Seasonal Unemployment (Syllabus 4.6.3)

Seasonal unemployment occurs when workers are idle for part of the year because the demand for their labour follows a predictable calendar pattern. It is a normal, unavoidable component of many economies.

Key Features

• Predictable and recurs each year.
• Usually short‑term – lasting weeks or a few months.
• Concentrated in industries that depend on weather, holidays or annual cycles.
• Workers often seek alternative work, training or self‑employment during the off‑peak period.

Causes (Syllabus 4.6.3)

1. Weather‑dependent production – e.g., planting, tending and harvesting crops.
2. Holiday‑driven demand – retail and hospitality peaks around Christmas, summer vacations or local festivals.
3. Tourism cycles – ski resorts in winter, beach resorts in summer.
4. Construction schedules – work slows or stops in extreme cold or heat.

How Seasonal Unemployment Is Measured (Syllabus 4.6.2)

• The LFS records the number of unemployed each month.
• Statistical agencies publish two series:
  • Unadjusted series – shows the raw rise and fall in unemployment each month.
  • Seasonally‑adjusted series – removes the regular seasonal component, allowing policymakers to see the underlying trend.
• Seasonally‑adjusted data are essential when analysing whether a rise in unemployment is due to a genuine economic slowdown or simply a normal seasonal dip.

Examples (UK & International)

• UK – Agriculture: Farm workers are employed during the wheat harvest (July–September) and are largely idle afterwards.
• UK – Coastal tourism: Hotel and restaurant staff work intensively in July–August and may be laid‑off in winter.
• UK – Retail: Extra sales assistants are hired for the Christmas period and often leave after 31 December.
• Alps (France/Switzerland): Ski‑resort instructors and lift operators work from December to March; the same workers are unemployed in summer.
• India – Mango farms: Labour demand peaks from March to June; workers return to informal or agricultural work once the harvest ends.

Consequences of Seasonal Unemployment (Syllabus 4.6.4)

Economic Consequences

• Regional fluctuations in unemployment rates and tax receipts.
• Variable welfare payments throughout the year.
• Under‑utilisation of skills during off‑peak periods, reducing overall productivity.
• Because the pattern is predictable, it can be accommodated in fiscal planning and business budgeting.

Social Consequences

• Lower household income during off‑peak months may increase poverty risk.
• Higher stress levels and reduced mental‑health wellbeing.
• Potential rise in short‑term crime rates in regions heavily dependent on seasonal work.
• Reduced community cohesion when large numbers of workers migrate in and out of an area each year.

Macroeconomic Consequences

• Seasonal dips in employment can depress aggregate demand, putting downward pressure on GDP in off‑peak months.
• If large enough, seasonal unemployment can affect inflation (e.g., lower demand may reduce price pressures).
• Policy makers must distinguish seasonal effects from cyclical unemployment to avoid inappropriate macro‑policy responses.

Government Policies to Reduce Seasonal Unemployment (Syllabus 4.6.5)

• Off‑season training programmes – fund vocational courses during idle periods to improve skill levels and employability in other sectors.
• Subsidised part‑time or flexible contracts – encourage firms to retain workers year‑round on reduced hours, with the government covering part of the wage cost.
• Unemployment benefits and income‑support schemes – provide a safety net while workers look for temporary work.
• Economic diversification – promote development of non‑seasonal industries in heavily seasonal regions (e.g., renewable‑energy projects, year‑round tourism).
• Fiscal stimulus targeted at off‑peak periods – government spending on infrastructure or public‑service projects during the low‑demand season to create temporary jobs.
• Monetary policy – lower interest rates can stimulate investment in sectors that smooth employment across the year (e.g., indoor leisure facilities).
• Supply‑side measures – improve transport links, broadband and housing to make seasonal regions attractive for non‑seasonal businesses.

Evaluation of Policies (AO3)

Data Interpretation Exercise (AO2)

Unadjusted monthly unemployment chart for a coastal tourist region (simplified).

1. Identify the months with the highest and lowest unemployment.
   Answer: Highest – December (≈ 90 %); Lowest – June (≈ 45 %).
2. Explain why the pattern is typical of a seasonal industry.
   Answer: Unemployment rises sharply in the off‑peak months (autumn/winter) when tourist demand falls, and falls during the summer peak when hotels and restaurants need many staff. The regular, predictable swing reflects a seasonal demand pattern.
3. How would the seasonally‑adjusted series differ from the chart above?
   Answer: The adjusted series would remove the systematic summer‑low / winter‑high swing, producing a flatter line that shows the underlying trend (e.g., a slight upward or downward movement unrelated to seasonality).

Comparison of Unemployment Types (Syllabus 4.6.3)

Suggested Diagram (Syllabus 4.6.4)

A line graph titled “Seasonal pattern of employment in agriculture” showing employment on the vertical axis and months (Jan–Dec) on the horizontal axis. The curve should peak during the harvest months (e.g., August–September) and trough in the winter months, illustrating the regular seasonal swing. This diagram can be used to explain how seasonal adjustment removes the swing to reveal the underlying trend.

Key Points to Remember (AO1)

• Seasonal unemployment is regular, predictable and linked to the calendar.
• It is most common in agriculture, tourism, retail and construction.
• Statistical agencies use seasonal adjustment to separate normal seasonal swings from genuine changes in the labour market.
• Consequences are economic (regional tax fluctuations, productivity loss), social (poverty, health, crime) and macro‑economic (impact on aggregate demand and inflation).
• Policies aim to smooth income, retain skills and diversify regional economies; each policy has benefits, costs and limitations that must be weighed against the aim of full employment.
• Understanding seasonality is essential for interpreting regional unemployment statistics and for evaluating whether macro‑economic policies are appropriate.