Unemployment Is A Key Macroeconomic Indicator

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Unemployment is a simple term in itself but the concept is not as clear-cut as it may suggest. Unemployment is a key macroeconomic indicator used by policymakers to determine the economy’s performance relative to it’s productive potential (OECD, 2014). However, for it to be a reliable indicator there must be a commonly accepted definition to allow for comparison. The United Kingdom follows the internationally agreed definition of unemployment set by the International Labour Office (hereinafter: ILO) as “Anybody who is without work, available for work and seeking work. This includes those who have actively sought work in the last 4 weeks, available to start work in the next 2 weeks, or is waiting to start work in the next 2 weeks” (Geneva 1982, Cited by International Labour Office). The Labour Force Survey (hereinafter: LFS) is a sample survey covering a three-month period that is consistent with the ILO definition, this allows for cross-country comparisons. It is a direct assessment of unemployment is used to establish those that are employed, unemployed or economically inactive. Another means of unemployment measurement is the Claimant Count, it’s a by-product of administrational data collected by records of those on job seekers allowance. For the sake of this essay I will not be focusing on the Claimant count due to it underestimating unemployment figures- as seen in below in Figure 1. Figure 1: Quarterly changes in Unemployment and the Claimant Count (aged 18 to 64),
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