Causes of unemployment

• Eco growth levels influence unemployment, especially cyclical unemployment

  • The demand for labour is derived from aggregate demand
    • as demand for goods/services stimulates production → ++ demand for labour
  • If AD is deficient (eco downturn) → unemployment may increase

• During the mining boom there was a strong demand for labour

  • → decreased unemployment from 7% to 4%

• Okun’s Law explains :: the relationship between unemployment and economic growth, showing that to reduce unemployment, the annual rate of economic growth must exceed the sum of percentage growth in productivity plus the increase in the size of the labour force in any one year.