Unemployment occurs when individuals who are actively seeking work are unable to find employment. It serves as a crucial economic indicator, often expressed as a percentage of the total labour force, reflecting underutilization of human resources in the economy.

• Cyclical unemployment: This type arises from economic downturns or recessions, where reduced aggregate demand leads to lower production and job losses.
• Structural unemployment: It results from a mismatch between workers’ skills and the demands of available jobs, frequently caused by technological advancements or shifts in industry composition.
• Frictional unemployment: This short-term form affects individuals temporarily between jobs or newly entering the workforce, as they search for suitable opportunities.