it is not required for sponsors to be employed. CIC will require the sponsor to supply an option c form that is obtained from the CRA which will show whether the sponsor has used social welfare prior to applying. the most recent year's taxes needs to be filed in order to get the Option c form.
The sponsor can live outside of canada during the application process, however CIC will require the applicant to explain plans for moving back to canada once approved. this can include letters from family willing to help financially, research on rentals, communities, jobs/indutries, realtors, etc. The applicant and sponsor need to show CIC they will reside in canada upon approval, otherwise there would be no point in applying.