Unemployment is when a person does not have a job and when they have actively sought work within the past four weeks, based on the definition given by the International Labour Organization (ILO).

Based on this definition, an "unemployed" person is a person:

  • (a) "without work", i.e. were not in paid employment or self-employment;
  • (b) "currently available for work", i.e. were available for paid employment or self-employment during the reference period;
  • (c) "seeking work", i.e. had taken specific steps in a specified recent period (usually 4 weeks) to seek paid employment or self-employment. The specific steps may include registration at a public or private employment exchange; application to employers; checking at work sites, farms, factory gates, market or other assembly places; placing or answering newspaper advertisements; seeking assistance of friends or relatives; looking for land, building, machinery or equipment to establish own enterprise; arranging for financial resources; applying for permits and licenses, etc.

An unemployed person has less income and hence cannot spend on as many products and services; this results in lower demand and reduces the potential for growth. Furthermore the governments are often obligated to pay unemployed individuals to ensure they can pay for the basics such as food and shelter. This results in the government having less money to invest in the country.