Below is a quick re-hash of an earlier post of mine on making sense of unemployment figures.
Interpreting unemployment figures
It is well known that employment figures are seen as a key economic indicator.
But what does an unemployment rate in 2012 of 5% in Australia really mean? It sounds quite high, right?
Well, not really. Countries have a natural rate of unemployment (known as the NAIRU) and for Australia it is a shade over 4%.
Unemployment should not really drop far below 4% for these four reasons:
1) Frictional unemployment - there is always a certain number of people moving between jobs and thus temporarily unemployed
2) Structural unemployment - e.g. those trained to work in industries that are become obsolescent
3) Seasonal unemployment - such as those who work in tourism or agriculture
4) Residual unemployment - economists might cruelly refer to this hard core of non-workers and "the great unemployable". For varying reasons, some people have not adjusted to the modern capitalist world and will never work. The same is true in all countries.
The reality is that at 5% unemployment, we're very lucky. Spain's unemployment rate is close to 25%, for example.
Source: The Economist