Economy and Employment are directly correlated. Various economic policies such as fiscal and monetary policies have deep impact on the employment level in an economy. Fiscal policies include decisions such as taxation policy. All other things remaining equal, increase in taxes lead to increase in the cost of production of goods and decrease in the incentive to produce. Thus, excessive increase in taxes negatively impacts production activities and thus decreases employment level.
Similarly, monetary policies have an impact on the money supply in an economy which affects the inflation level. Excessive increase in inflation again has negative impact on employment level. Inflation may lead to lower demand as the purchasing power of money is decreased, which consequently leads to lower production and hence lower employment level. Thus, employment level may affected by changing the economic policies.

Income, or what a person makes, can only spent on daily living expenses and extras if there is a sufficient amount after federal, state, and local taxes are withdrawn. The greater the amount of taxes that are withdrawn, the less income that will be available to spend on daily living expenses. This income is also known as discretionary income or purchasing power. When people are able to make purchases the factory or company makes profits from the sales. This in turn leads to a need for jobs to maintain a level of demand. Thus jobs are maintained or created. If the level of demand decreases, based on the reduction of available income for spending, then fewer jobs are needed to meet demand, which leads to layoffs. On the other hand, if demand increases, more jobs are needed to maintain a higher level of demand. This is job creation. When there are jobs, the government can collect more taxes, which run the city or the nation. Otherwise, the governmenthas to borrow money to stay afloat and meet all the obligatory expenses, such a garbage clean up.