Abstract

Unemployment is not only pertinacious to output growth, but it has other social costs. As economies seek to develop through elimination of inequalities, alleviating poverty and ensuring output growth, inflation and unemployment stand as scarecrows to investors. This research aims to evaluate the economic effects of unemployment and inflation on output growth in South Africa. An ARDL model was employed to estimate short-run and long-run impact of unemployment rates and inflation rate among controlled variables on real GDP in South Africa for the period of 1994-2019. The results show that inflation depresses real GDP; human capital and physical capital promotes real GDP. Based on the findings, unemployment can best be tackled through increase supply of and improvement in the quality of physical capital which increases labour productivity as well as investment in human capital. The results found that an in increase in the real GDP will increase investment, which further generates employment.

Key words: Unemployment, inflation, output growth.