Unemployment

Unemployment is the number of people in an economy who are willing and able to work and actively looking for a job, but cannot find one. It measures joblessness across the whole country, not just staff losing their jobs at a single business.

When unemployment rises

With more people out of work, total consumer income usually falls. Households spend less, so demand for many products drops. For example, a soft play centre may find fewer families buying entry tickets and café meals. The fall is often bigger for non-essential products that customers can put off or cut out.

Recruitment can get easier. A business advertising a vacancy may receive more applications, fill the post faster and feel less pressure to offer large pay rises to attract workers. However, existing employees may feel less secure in their jobs. If they worry about being made redundant, their motivation and productivity can fall.

When unemployment falls

Falling unemployment usually means more people earning and spending, so demand rises. But suitable staff become harder to find, and a business may need to pay more or offer better conditions to recruit them.

It depends on the business

The effect is not the same for every firm. A labour-intensive business such as a childcare nursery, whose costs are mostly wages, is more exposed when it must pay more to attract staff, because pay makes up such a large share of what it spends. A business with heavy fixed costs, such as a ten-pin bowling alley paying rent, insurance and business rates on a large building, cannot respond quickly by cutting those costs when demand falls, so its profit falls quickly if fewer customers come through the door.