What is an example of a cyclical business?

For example, the airline industry is a fairly cyclical industry. In good economic times, people have more disposable income, so they are more willing to take vacations and make use of air travel. Conversely, during bad economic times, people are much more cautious about spending.

What are the benefits of owning a cyclical business?

Companies that operate in cyclical industries deal with economic downturns by reducing their cost base. It can be achieved through several methods, such as conducting employee layoffs, cutting employee bonuses, spending less on marketing and advertising, etc.

How does the performance of a cyclical business correlate to the business cycle?

Cyclical industries are sensitive to business cycles, so downturns in the cycle force consumers to prioritize expenses and potentially pare some costs that are not essential. Therefore, industries that focus on nonessential products face the biggest risk of revenue loss when economic contraction takes hold.

What causes cyclical unemployment?

Cyclical unemployment is the main cause of high unemployment rates. It's caused by a downturn in the business cycle. It's part of the natural rise and fall of economic growth that occurs over time. Cyclical unemployment is temporary and depends on the length of economic contractions caused by a recession. A typical recession lasts around 18 months.