Rising global unemployment has impacted heavily on the youth. According to ILO (2006), by 2005 the number of unemployed youth worldwide increased steadily to approximately 85 million, amounting to closely 47% of the total unemployed. However, unemployment rate does not capture the underutilization of labour and evidence on factors explaining unemployment in developing economies, Kenya included is limited. This study seeks to empirically analyse the factors explaining youth unemployment, underemployment and full employment in Kenya; including the role of education and training in explaining youth unemployment in the country. Data used for the study is the Kenya Integrated Household Budget Survey (KIHBS) 2005 / 2006. We employ a multinomial logit model for analysis. Key findings indicate that more female youth are unemployment compared to their male counterparts. Further, despite government efforts to increase access to education both at primary and secondary levels, there are still youths who have not been able to successfully complete post primary education since the average years of schooling is 9 years. Despite the overall dismal performance by the youth in education attainment, the buffer level of education and unemployment is way above basic education (primary and secondary levels of education). Could this be an indication of a more serious problem like the “diploma disease” in the Kenyan Economy? The results also show that there are significant differences in employment between males and female. There is therefore need to engender employment policies, in order to ensure that outcomes are gender inclusive.Further research should help understand what other factors enhance attainment of post primary education besides subsidization.