www.ccsenet.org/ijef International Journal of Economics and Finance Vol. 3, No. 3; August 2011 Published by Canadian Center of Science and Education 139 Employment and Macroeconomic Variables: Evidence from Malaysia, Philippines and Singapore Norazlina Abdullah (Corresponding Author) Department of Management, Faculty of Business Management and Accountancy Universiti Sultan Zainal Abidin Kampus Gong Badak, 21300, Kuala Terengganu, Terengganu, Malaysia Tel: 60-9-665-3764 E-mail: norazlina@udm.edu.my Zalina Abu Naim Department of Management, Faculty of Business Management and Accountancy Universiti Sultan Zainal Abidin Kampus Gong Badak, 21300, Kuala Terengganu, Terengganu, Malaysia Tel: 60-9-665-3784 E-mail: zanaim@udm.edu.my Yasmiza Long Department of Accountancy, Faculty of Business Management and Accountancy Universiti Sultan Zainal Abidin Kampus Gong Badak, 21300, Kuala Terengganu, Terengganu, Malaysia Tel: 60-9-665-3780 E-mail: yasmiza@udm.edu.my Received: October 27, 2010 Accepted: November 15, 2010 doi:10.5539/ijef.v3n3p139 Abstract This study examines the meaningful relationship between employment and macroeconomic variables such as domestic capital, gross domestic product and government expenditure in three major ASEAN economies, namely Malaysia, Singapore and Philippines. Johansen (1991) cointegration method coupled with VECM (vector-error-correction model) testing procedure is employed to analyze the impact of the selected variables. The period of interest is 1970-2005 using annual data. The empirical results demonstrate mixed results whereby though cointegration could be detected for all three countries; in the case of Malaysia, the causality that could be detected are, capital granger causes employment and employment granger causes government expenditure, as for Singapore, trade granger causes capital and lastly for the case of Philippines, both income and trade granger causes government expenditure. Keywords: Domestic Capital, Gross Domestic Product, Government Expenditure, Employment, Cointegration 1. Introduction As in many developing countries, development strategies in ASEAN countries are influenced by the goal of achieving respectable economic growth, and ASEAN countries have been among the fastest growing economies in the world and they have been able to sustain this momentum over time. Employment is a very important issue in either developed or developing countries. Employment performance is powerfully influenced by macroeconomic policies; and public policy can mitigate the effects of those factors that are inevitable and remove the ones that are not. Too often national efforts at macroeconomic stabilization have reduced economic growth to rates that are too low to allow adequate employment growth, the study cautions. Phenomenon of lower employment or underemployment must have proper solution and attention since when the unemployment or in the other word employment declined, that can be burden to a nation. In order to place the ensuring discussion of relationship between employment and output growth, it will be helpful at the outset review some key aspect of output growth and employment trend in the selected countries. Malaysia has maintained high and full employment from 1970’s until 2005. This can be attributed to the almost continuous rapid expansion of the economy over the past three decade.(Note 1) In fact, in certain sectors of the economy, the demand for labour has been so great that there have shortages. Programmes to increase employment and overcome labour shortages have boosted employment opportunities. Employment growth slightly exceeds labour force growth and unemployment dropped, to 5.3 percent in 1980. In 1980, 41 percent of the labour force was in agriculture.