International Journal of Business and Social Science Vol. 2 No. 11 [Special Issue - June 2011] 232 Employment and Economic Growth Nexus in Nigeria SODIPE, Oluyomi Ayoyinka* OGUNRINOLA, Oluranti Isaiah** Department of Economics and Development Studies School of Social Sciences College of Development Studies Covenant University Ota, Ogun State, Nigeria E-mail: oluwayomis@yahoo.com*, olu.ogunrinla@covenantuniversity.edu.ng* Abstract This paper examines the employment and economic growth relationships in the Nigerian economy. A simple model of employment was formulated and estimated using the Ordinary Least Squares technique before and after the time series data used for the study were corrected for non-stationarity using Hodrick-Prescott filter. The result of our econometric analysis shows that a positive and statistically significant relationship exists between employment level and economic growth in Nigeria while a negative relationship was observed between employment growth rate and the GDP growth rate in the economy. We concluded the paper by advocating for increased labour-promoting investment strategies that will help to reduce the high current open unemployment in Nigeria. Key Words: Employment, Economic growth, Employment Elasticity. JEL Classification Codes: E24, J21, O47 1. Introduction The goal of achieving full employment among other macroeconomic goals is an important one in many developing nations where unemployment and underemployment has been a major cause and consequence of widespread poverty. However, in spite of the very high-sounding electioneering promises of political leaders in many poor nations of the world, the achievement of impressive growth and decent employment remains a mirage. High rate of unemployment, unimpressive growth rates and poverty among other miseries of the populace, are the order of the day. For instance, facts available for the Nigerian economy show a high rate of unemployment and underemployment. The rate of open unemployment was 12% in March 2005; it rose to 19.7% in March 2009 while the rate of underemployment hovered around 19% in 1998 (Adebayo and Ogunrinola, 2006, NBS 2010). Among the youths in the 15-24 age cohort, the rate of unemployment is over 40% according to the 2010 edition of the Labour Force Sample Survey of the National Bureau of Statistics. Thus, the issue of real output and employment growth in developing nations is a sine qua non for poverty reduction and a more equitable income distribution ( Fofana 2001). Many studies on Nigeria’s employment situation have been devoted to unemployment and its determinants and/or its impacts on economic growth (Adebayo and Ogunrinola, 2006; Oladeji, 1994; Omotor and Gbosi 2006). However, to our knowledge, not much research attention has been given to the estimation of employment elasticity with respect to economic growth in Nigeria. Though from a cursory look at the Nigerian data on employment level and real GDP, it appears that the recent economic growth trends and patterns have been insufficient to make any appreciable impact on employment generation and poverty reduction, but this has not been sufficiently investigated empirically in the literature (Oni, 2006; Patterson et al 2006). This study is therefore an attempt to fill this gap by employing an econometric method for the purpose of estimating the employment- economic growth relationship in Nigeria. The rest of this paper is organised as follow: Section 2 presents the review of relevant literature on the employment-economic growth relationship; Sections 3 presents the data sources and research methodology respectively; section 4 reports the empirical evidences generated from data analysis while section 5 concludes the paper. 2. Theoretical Issues and Brief Survey of Literature 2.1 Theoretical Issues The desire to expand decent and productive employment is at the heart of any nations’ macroeconomic policies geared towards poverty reduction.