Question

what is the conection and impact U.S GDP with U.S unemployment rate

Answer 1

The relationship between GDP growth and unemployment rate is indicated in Okun’s law. The law suggests that in order to decrease 1% unemployment rate, there should be 4% increase in GDP in a year.

In the US:

Few statistical data are as below:

Year	GDP growth rate	Unemployment rate	Change in unemployment rate
1996	3.8%	5.4%
1997	4.4%	4.7%	[(4.7 – 5.4) / 5.4] × 100 = -12.9%
1998	4.5%	4.4%	[(4.4 – 4.7) / 4.7] × 100 = -6.3%
1999	4.8%	4%	[(4 – 4.4) / 4.4] × 100 = -9.1%
2000	4.1%	3.9%	[(3.9 – 4) / 4] × 100 = -2.5%
2001	1%	5.7%
2018	2.9%	3.9%
2019	2.3%	3.5%	[(3.5 – 3.9) / 3.5] × 100 = -11.4%

As per data, in the years when GDP growth rate are more than 4%, unemployment rate decreases surely (as per the last column) and such decreases are atleast less than 1% rate.

Year 2019: Unemployment rate decreases more than 1% although the GDP growth rate is not 4%. This is the breach of Okun’s law.

Therefore, the law is not universally true every time.