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FatNarwhal · Model
Okun's law
Okun observed that unemployment falls roughly half a point for every point real output grows above its potential rate. This runs that in reverse: pick a potential growth rate and a coefficient, and compare the unemployment change the rule predicts with what happened.
Δu = −c × (g − g*)
What this cannot tell you
Potential growth is not observable and is a slider here for exactly that reason. The rule is a rule of thumb from one economy in one era; it fits recessions far better than it fits the recoveries after them.
Parameters
2%
0.5
Result
- Correlation r
- 0.73
- Fit slope
- 0.24
- Quarters
- 248
Between predicted and observed change
1.00 would mean the rule is exactly right at this coefficient
Series behind this model
- US real GDP253 obs · through 2010-01-01
- US unemployment rate747 obs · through 2010-03-01
Everything is computed in your browser from these series. Nothing is saved, so move the sliders freely — sources and licences.