Question

What are the adverse effects of unemployment in an economy?

Answer 1

You could probably write a book about the adverse effects of unemployment in a capitalistic society. What drives the machine of capitalism? It is a demand for goods and services and a return on investment, isn't it? If people are unemployed, production of goods and provision of services falls off, and simultaneously, the people who are unemployed lack the wherewithal to purchase goods and services. People who still have money, investors, are reluctant to invest any money in the production of goods or the provision of services because when production and consumption are down,there is no opportunity to get a return on the investment. 

Effects of unemployment are social, too, not just economic.  Frequently, crime rates rise as people are unable to meet their needs through work. Divorce rates often rise because people cannot solve their financial problems.  The rate of homelessness rises, as do the rates for mental and physical illness.  Homes are foreclosed upon or abandoned, and neighborhoods deteriorate as a result
The ability of government to provide for people is also seriously compromised.  When there is high unemployment, people pay less in income taxes and also pay less in sales taxes because they purchase fewer goods and services.  This leads to less in the way of public services, which includes everything from police and fire protection to the staffing for the municipal swimming pool and rubbish pickup. 

As you can see, unemployment is not a good thing for anyone in our society, and even the people who remain employed will suffer as a result.