Unemployment rate is defined as the number of people in working age that are currently unemployed but are actively looking for a job, divided by the total labor force. As of 2020, global unemployment rate stood at 6.57 percent. This figure is much higher than in previous years and can be attributed to the effects of the COVID-19 pandemic. The unemployment rate is a lagging economic indicator, which means that it reacts to past circumstances, rather than predicting in which direction an economy may evolve.
What affects the unemployment rate?
There are many factors that have an effect on the unemployment rate. Usually, when an economy is in recession, it is to be expected that the unemployment rate will increase. Businesses struggling to cope with poor economic conditions tend to stop recruiting, or even reduce the working force if no other solutions can be found. A glance at the Gross Domestic Product (GDP) can help to indicate future unemployment trends. Another important aspect to consider is demography of a population. In an aging society, there are less people counting as labor force.
Youth unemployment
In some countries, youth unemployment rate is much higher than overall unemployment rate. The reasons behind this might be the overall state of the economy, access to education and its quality, or well-functioning job market offering diverse entrance-level positions. Lack of job positions as well as unsatisfactory wages may be the reason people to leave their home countries to find work abroad. The existence of Schengen Area in Europe makes it possible for people to travel freely across countries in search for better employment opportunities.
Effect of unemployment on health
Unemployment can affect both physical and mental health. The possibility of losing a job is one of the major concerns of families worldwide. Even though the unemployed can count on government support, they still may have problems to make the ends meet, especially with recession and high inflation hitting the markets. Good news, though, is that unemployment rates are supposed to decrease slowly in the next years.
