Hysteresis

Actual Unemployment can have effect on NRU

Extended period of cyclical unemployment can result in higher NRU through the hysteresis effect as it

Can change the person who has become unemployed
à lose their job skills and therefore their ability to find jobs even after the recession
à Changes the individual’s attitude toward work and reduces his desire to find work probably because of lack of confidence in finding work

Change employers perspective
à Perceive long term unemployed workers as having lesser employability à decrease demand for labour