This is a question that many people probably ask themselves. I will try to answer it.
First, we need to let go of the idea that everyone who is not employed is unemployed. That's not how statistics work. The working-age population is divided into three main groups: "Employed", "unemployed" and "outside the labor force".
This is what it looks like in Statistics Sweden's Labour Force Survey for 2021 (Age range 15-74 years):
When calculating the employment rate, the number of unemployed is divided by the population. In the figure above 5,059,000 / 7,512,000 = 0.67 (i.e. 67% of the population is employed.
But unemployment is calculated _not_ as a share of the population, but as a share of the labor force. In the figure above, unemployment is 489,000 / 5,547,000 = 8.8%.
What does it take to be "unemployed" and not "out of the labor force"? You need to be "actively looking for work." If you are not looking for a job, you are not unemployed.
Having different numbers in the denominator for the employment rate and unemployment (the entire population and the labor force (which consists of "employed" + "unemployed") can have strange consequences.
For example, we can imagine a hypothetical country that has a 50% employment rate and 0% unemployment. How is that possible?! Well, imagine that we have a regime that prohibits women from working. If all men work (i.e. are "employed" in the statistics) and constitute half of the population..
... then the employment rate is 50%. Since no women are allowed to work, there are no job seekers and then the unemployment rate is 0%). We can also imagine that a medical miracle cure is invented that makes 100,000 people suddenly able to work.
Then they go from not working as sick people to not working as unemployed people and then unemployment rises.
So in my eyes, unemployment is a more difficult metric to interpret than employment.
The reason I think employment is a more important measure than unemployment is that it is employment that creates value and tax revenues that keep welfare services running. I would rather live in a country with 80% employed and 8% unemployed than in a country where...
60% work and have 3% unemployment. I think most people do that if they think about it.
A common criticism is that it is enough to work 1 hour during the measurement week to be counted as "employed". That is true, it is regulated in an ILO resolution that all countries follow.
But the 1-hour limit is irrelevant because no one works that little (<0.2%). In the age group 20-64, almost 97% have a job of at least 20 h/week and 83% have a job of at least 35 h/week.
Another common criticism is that there is a lot of "job-based work", which means jobs that are financed with funds from the Swedish Public Employment Service. But it is only the measures that go towards wage subsidies to employers that make the participants count as employed.
These wage subsidies from Af raise the employment rate by about 1.6 percentage points for the 20-64 age group, so it's not a big deal.
This is how subsidized jobs have developed over time:
It is important to keep in mind that 60% of the subsidized jobs go to people with reduced working capacity, i.e. a group where the alternative to a subsidized job has in many cases been early retirement, which has cost society much more.
Correction: "When calculating the employment rate, you divide the number of unemployed by the population. In the figure above 5,059,000 / 7,512,000 = 0.67 (i.e. 67% of the population is employed." "Dividing the number _employed_ by the population" should of course be stated.
Correction 2: "Then _they_ go from not working as sick people to not working as unemployed people and then unemployment rises." it should of course read. (Sorry, I can distinguish between "they" and "them"...)