Unemployed refers to Tropican citizens without a job. Unemployed citizens naturally have no income and a "job quality" of 0, making them upset and eager to find work. Being unemployed for too long frustrates citizens and some of them may become criminals in order to start earning money however they can.
Since they have no form of income, unemployed people are forced to live in shacks unless they're married to an employed person. Building no rent housing or enacting universal Free Housing will help them live better and be happier. In Tropico 3, they're also eligible for social security payments.