Employed: in paid work, full-time or part-time, including self-employed people.
Unemployed: willing and able to work and actively looking for a job, but without one.
Labour force (the economically active): everyone who is employed plus everyone who is unemployed.
Economically inactive: people who are not working and not looking for work, such as full-time students, retired people, full-time carers and the long-term sick. They are outside the labour force.
Full employment: all those who are able and willing to work have a job. In practice, unemployment is low and mostly short term (people between jobs or out of season).
Who counts as employed, unemployed and inactive
Exam tipSomeone who doesn’t have a job is not automatically unemployed. A retired person or a full-time student who isn’t looking for work is inactive.
Unemployment
Being willing, able and actively looking for work, but without a job.
Labour force
The economically active: the employed plus the unemployed.
Economically inactive
People not in work and not looking for work, such as students and retired people.
Full employment
When all those who are able and willing to work have a job.
3.2.2.3 How unemployment is measured
Measuring unemployment: the Labour Force Survey and the Claimant Count
The LFS measure is the UK’s headline unemployment rate.
The two measures can give different figures, so always say which one you mean.
Labour Force Survey (LFS)
Claimant Count
Who runs it
The ONS, by surveying households
The ONS, from benefit records
Who counts
People without a job who have looked for work in the last 4 weeks and can start within 2 weeks (the ILO definition)
People claiming benefits because they are unemployed
Strengths
Same definition as other countries, so easy to compare; includes people who don’t claim
Quick and cheap: the records already exist
Weaknesses
A sample, so it can be slightly wrong; costly to run
Misses unemployed people who can’t or don’t claim; changes when benefit rules change
Exam tipIt is the Claimant Count (AQA’s vocabulary list misprints it as “Claimant account”).
Labour Force Survey
A survey of households used to measure unemployment with the ILO definition.
ILO definition of unemployment
Without a job, has looked for work in the last four weeks and can start within the next two weeks.
Claimant Count
The number of people claiming unemployment-related benefits.
3.2.2.3 Measurement of unemployment
Calculating the unemployment rate
Unemployment rate = number unemployed ÷ labour force × 100.
Labour force = employed + unemployed. Never include inactive people.
Working backwards: number unemployed = labour force × unemployment rate ÷ 100.
The level of unemployment is a number of people; the rate is a percentage.
Worked exampleIn an invented country, 28.5 million people are employed and 1.5 million are unemployed. Calculate the unemployment rate.
Labour force = 28.5 m + 1.5 m = 30.0 m
Rate = 1.5 ÷ 30.0 × 100
5.0%
Worked exampleThe working-age population is 40.0 million. 8.4 million are economically inactive and 30.0 million are employed (invented). Calculate the unemployment rate to 1 decimal place.
Labour force = 40.0 m − 8.4 m = 31.6 m
Unemployed = 31.6 m − 30.0 m = 1.6 m
Rate = 1.6 ÷ 31.6 × 100 = 5.06…
5.1% (not 1.6 ÷ 40.0 = 4.0%, which wrongly includes inactive people)
Worked exampleThe labour force is 34 million and the unemployment rate is 4.5% (invented). How many people are unemployed?
Unemployed = 34 million × 4.5 ÷ 100
1.53 million
Exam tipIn a recent paper many students divided by the whole working-age population, including inactive people. Work out the labour force first. AQA gives no marks for the number unemployed alone when the rate is asked for.
Unemployment rate
The number unemployed as a percentage of the labour force.
3.2.2.3 Types of unemployment: structural
Structural unemployment
Structural unemployment: caused by changes in the structure of the economy. An industry declines, so workers’ skills are no longer in demand.
Causes: new technology (self-checkouts, automation, AI), cheaper imports, changing tastes, moving away from fossil fuels.
It often hits particular towns or regions, such as former coal-mining or steel areas.
It can last a long time, because workers need new skills or must move to find work. Economists call this being occupationally or geographically immobile (optional terms).
The four types of unemployment at a glance
Exam tipStructural unemployment is about a mismatch of skills or places: there may be vacancies, but not ones these workers can fill. That is why training is the usual remedy.
Structural unemployment
Unemployment caused by changes in the structure of the economy, so workers’ skills are no longer in demand.
Occupational immobility
When workers find it hard to switch jobs because they lack the skills (optional term).
Geographical immobility
When workers find it hard to move to where the jobs are (optional term).
3.2.2.3 Types of unemployment: frictional
Frictional unemployment
Frictional unemployment: people between jobs, searching for one that suits them.
Causes: imperfect information (workers don’t know about every vacancy and firms don’t know about every worker), leaving a job to look for a better one, graduates starting out.
Generous benefits can let people search for longer, so frictional unemployment may rise.
It is usually short term and exists even when the economy is doing well.
Exam tipA worker who has quit to find a better-paid job, or a graduate job-hunting, is frictionally unemployed. If the job has disappeared for good, it is structural.
Frictional unemployment
Short-term unemployment while people move between jobs, often because of imperfect information.
3.2.2.3 Types of unemployment: seasonal
Seasonal unemployment
Seasonal unemployment: caused by changes in demand for workers at different times of the year.
Examples: beach resort and ski-resort staff out of season, fruit pickers after the harvest, extra shop staff after Christmas, some building work in winter.
It is predictable and repeats every year.
Exam tipSeasonal unemployment is regular: it comes back at the same time each year. A one-off fall in demand because of a recession is cyclical.
Seasonal unemployment
Unemployment caused by falls in demand for workers at certain times of the year.
3.2.2.3 Types of unemployment: cyclical
Cyclical (demand-deficient) unemployment
Cyclical unemployment (also called demand-deficient): caused by a lack of demand for goods and services across the economy, usually in a slowdown or recession.
The chain: spending falls → firms sell less → they need fewer workers → jobs are cut → the unemployed spend less → demand falls further.
Causes: a fall in consumer confidence, higher interest rates, higher taxes or cuts in government spending, a fall in exports.
It affects many industries at once, but especially those selling expensive or postponable items: building, cars, furniture, holidays.
Exam tipWhen asked why cyclical unemployment rises in a recession, show the chain: less spending → less output → fewer workers needed. Labour is a derived demand.
Cyclical unemployment
Unemployment caused by a lack of demand for goods and services, often in a recession (also called demand-deficient unemployment).
Recession
A period when real GDP falls, usually for two quarters in a row.
3.2.2.3 Consequences of unemployment
Consequences of unemployment for different groups
Low unemployment brings the opposite: more tax revenue, less spent on benefits, higher spending. But it can mean labour shortages and rising wages, which can push up prices.
Group
Consequences
Individuals
Lower income; stress and poorer mental health; skills get rusty, so it is harder to find work the longer it lasts
Families
Less to spend; debt; pressure on relationships and children’s opportunities
Local communities
Shops and services lose customers; more crime and social problems in some areas; people move away
Firms
Lower sales, so less profit. But more people applying for jobs and less pressure to raise wages
Government
Less income tax and VAT; more spent on benefits; so a bigger budget deficit and less for public services
The economy
Lost output: goods and services that could have been made are not; lower growth
Exam tipExaminers report students claiming that higher unemployment forces firms to pay higher wages. The reverse is more likely: with more people looking for work, firms find it easier to recruit and pay rises slow down.
3.2.2.3 Government policies to reduce unemployment
Which policy for which type?
The policies themselves are taught in their own topics. Here is how they match the types.
Fiscal and monetary policy work on demand. Training and similar supply-side policies work on skills and mobility.
See the topics on fiscal policy, monetary policy and supply-side policies for how each works and its drawbacks.
Type
Policies that fit
Why
Cyclical
Lower taxes or more government spending (fiscal policy); lower Bank Rate (monetary policy, by the Bank of England)
Raise spending, so firms need more workers
Structural
Education, training and retraining; help to move; incentives for firms to set up in hard-hit areas
Give workers the skills, or bring jobs to where they live
Frictional
Better job information (job centres and websites); changes to benefits that encourage a quicker search
Match workers to vacancies faster
Seasonal
Encouraging year-round tourism or work; training for a second job in the off-season
Spread demand across the year
Exam tip“Create more jobs” or “raise wages” is not a policy and scores nothing. Name a government tool, such as a cut in income tax or a retraining scheme, and say which type of unemployment it tackles.
3.2.2.3 Employment and unemployment in the UK
UK employment and unemployment: the figures
In June to August 2026, the UK unemployment rate (LFS, people aged 16 and over) was 4.7%, down 0.1 percentage points on both the previous quarter and the year before (ONS, published 20 October 2026).
In the same period, the employment rate for people aged 16 to 64 was 75.3% and the inactivity rate was 20.9%.
The Claimant Count was 1.701 million in September 2026 (provisional).
Reading the figures: a change of 0.1 is in percentage points; check whether a chart shows a rate (%) or a level (people).
Last checked: November 2026. The ONS publishes new figures every month; the next release was due on 17 November 2026.
Exam tipTo find a mean rate from a table, add the rates and divide by how many there are. Don’t confuse it with the middle value (the median).
Genious