Okun’s Law during the Great Recession: jobs and growth are still linked

There is further evidence that employment growth is low because output growth is poor. According to a new IMF working paper, “Much of [the cross-country differences in employment growth] are the result of the differences in real GDP growth. A scatter chart of real GDP growth and employment growth between 2008 and 2011 shows a strong correlation between the two (Figure 1). Latvia, which had the largest decline in real GDP between 2008 and 2011, also experienced one of the largest reductions in employment. And Poland, which had the largest increase in real GDP during this time period, also had one of the best employment outcomes.”  

Ball, Leigh, and Loungani also provide evidence on how well Okun’s Law has held up during the Great Recession.

Posted by at 8:50 PM

Labels: Unemployment

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