The main objective of this paper is to investigate the unemployment and growth rates of Malaysia. Unemployment is an important issue for developing economies in a country. Inefficiently of using labor resources will cause to high unemployment rate. The result shows that the economics in Malaysia is better with high employment. In economics, unemployment statistics measure the condition and extent of joblessness within an economy. Full employment should be a major macroeconomics goal because it maximizes output. For many years, the manufacturing has been the strongest sector in the country until it is now being progressively replaced by the service sector.

In this research, we will measure how unemployment affects economics growths in Malaysia and also the reason of high unemployment rate of fresh graduate. Thus further research and relevant factors is required.

Introduction

This paper asks the question of how the rate of economic growth affects unemployment. The main considerations that lead us to think that this is an interesting question have to do with the re-allocative aspect of growth. Faster economic growth must come from a faster increase in knowledge.

Besides, unemployed graduates have become a serious case in Malaysia that need more concern by the government. In year 2006 involving 132,900 graduates from institutions of higher learning all over Malaysia indicated that 30.7% of graduates remained unemployed six months after graduation, while 5.7% were still awaiting job placement (Tan, 2007). There are more female graduates in this country were unemployed because they lacked the relevant skills required in the labor market despite having excellent academic results. The number was much higher in comparison to male graduates (Nor Hartinin, 2007).

In the sixties and seventies “Okun’s Law” was regarded as one of the most reliable macroeconomic relations. “Okun’s Law” can clearly present the relationship between GDP growth and unemployment. Most economists were playing down the relationship between growth and unemployment. Unemployment was explained by structural factors, mainly by inflexible labor markets: too high wages, too high unemployment benefits and labor’s attitude.

Unemployment

Unemployment or joblessness occurs when those individuals actively seeking jobs remain unhired within the past four weeks. Unemployment is expressed as a percentage of the total available work force. The level of unemployment varies with economic conditions and other circumstances.