Unemployment rate is directly related to the economic activity of the country. Unemployment rate increases with lower economic activity as companies cut jobs to sustain the rough weather and Government and companies recruit less due to falling demand of services and products. That’s why unemployment rate is used as an important indicator of GDP activity and growth.
Voluntary unemployment could be due to the transition from one job to another, as it would take to find a new job and leaving the current job. This is for a short span of time only. When the information about available jobs is not properly passed to the unemployed it could cause them frictional unemployment. When there is a reduction in the demand for labour people are laid off and this cause structural unemployment.
Cyclic unemployment is due to recession where industries are closed and this causes unemployment. Some people will be willing to accept work at the current salary but will not be able to get an offer this is called involuntary unemployment and when a person refuses to accept a job offer at the current salary it is said to voluntary unemployment.
Cost of unemployment is no proper use labour recourses and this leads to market failure. When the unemployment rate increases the national income reduces. When a person is not employed there is reduction on the spending. The government losses as there is fall in revenue through income tax, VAT, insurance, etc. Long term unemployment could cause the hysteresis effect, people deprive of wealth and health, etc. Some of the benefits of unemployment are low inflation and lesser consumption and production.