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Okun's law

Okun's law is the observation that a one percent decrease in the unemployment rate above full employment will increase GDP by two percent.

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Expanded Definition

In the 1960s, Arthur Okun discovered an empirical relationship between changes in unemployment and the growth of the gross national product. That relationship has held up well since then but is now usually expressed using gross domestic product (GDP). Basically, Okun's Law says that, in general, for every one percentage point change downward in unemployment, GDP will grow two points above 3.2%. To illustrate, a 1% drop in unemployment would equate to a 5.2% growth in GDP.

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