Economic Indicators and Past Budget Stances (Unit 4 Topic 2)  

Unemployment and Underutilisation: Measuring Spare Capacity

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The unemployment rate is one of the most closely watched economic indicators, measuring the proportion of people actively seeking work but unable to find it. Yet on its own it tells only part of the story. The underutilisation rate adds a second, often overlooked group — the underemployed: part-time workers who want and are available for more hours.

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Together, these measures reveal how much of the nation's labour is going unused — and unused labour represents lost potential output, meaning goods, services, and incomes that could have been produced are forgone. As both rates fall, spare capacity disappears and the economy nears its productive limit. Economists estimate this limit using the NAIRU — the level of unemployment below which wage and price pressures begin to build.

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Use the interactive to trace both rates since 1999, and switch on the NAIRU overlay in the Explore tab to see when the labour market has run hot or cold.