Unemploymenthas huge importance in the macroeconomic problems. If unemployment beexperienced in any country, it will not only have an effect on the macroeconomicindicators of this country, but will also damage the social values of such state.In the case of Pakistan; the unemploymentwas 3.
14 percent in 1973; it increased to 3.7 percent in 1980, then it starteddeclining and became 2.55 percent in 1989. After the year 1989; Theunemployment started increasing and it reach to its highest stage 8.64 percentin 2003.
Afterwards, the unemployment rate reached 5.34 percent in 2010Apartfrom unemployment; inflation is a further macroeconomic issue that damages botheconomic and social indicators in any country. Pakistan economy has also comewith this large macroeconomic problem. . The inflation rate was 23.
07 percentin 1973. This year, it increased 26.66 percent in 1974, and it started and inthe year 1980 was 11.94 percent, and afterward this year reached 7.84 percentin 1989. After year 1989, the inflation in the year 2003 was 2.91% and in theyear 2010 it reached 13.
88 percent. The inflation changed every year andfollowed both trends and downwards.Thereal per capita GDP is used as proxy for economic development in this study. Itis normally considered that when there is economic growth in the country; itincreases the speed of economic activity in the country, which leads toincreasing employment.
Increase in employment Increases the power of people’spurchasing of people in the country and as a result, consolidation consumptionis increasing, in which overall demands are increased and inflation in thecountry is increasing Real percentage was GDP. 15025.8 years in 1973; it becamerupees 17561.04 years in 1980, it went up to Rs. In the year 23244.
33 years1990, the above trend continues. In the year 2000, 26474.2 and finally it hasreached the rupee. In 2010, 34588.9Theassociation between inflation and unemployment is a relationship which has gota great fame in the literature. The studies like Rogerson’s (1988); Cooley andHansen (1989), Rogerson’s (1988) Mortensen and Pissarides (1994), Shi (1997),Pissarides (1999), Berentsen, Lagos and Wright (2005), Lehmann (2006), Farmerand Beyer (2007), Kumar (2008), Berentsen, Wright and Menzio (2008), and Menzioand Wright (2008) have found a positive relationship between inflation andunemployment in the long run.
On the other hand; Sala, Snower and Karanassou (2003), Franz(2005), and Wolters and Schreiber (2007) had found an converse relationshipbetween inflation and unemployment in the long run.another, the relationshipbetween economic growth and unemployment, has got huge name in the studies ofmacroeconomics .The studies like Vandemoortele (1991); Oladeji (1994), Umo(1996), Rama (1998), Silvapulle (2004) and Stephen (2012) have found an inverserelationship between economic growth and unemployment for different periods forthe different countries respectively. It’s based on argument; this study is expectedat finding empirically the impact of inflation; trade openness, urbanpopulation and economic growth as share of total population on unemployment incase of Pakistan for the period ranges from 1973 – 2010.