Okun's law calculator

See how a change in the unemployment rate lines up with real GDP growth relative to trend, or run the arithmetic the other way. You choose the Okun coefficient. Every step stays visible. This is a classroom rule of thumb, an empirical regularity, not a law of nature, and not a forecast. The arithmetic runs entirely in your browser.

A common textbook starting point is about 2. A rise in unemployment of 1 percentage point then lines up with real GDP growth about 2 percentage points below trend. Okun's 1962 illustration was closer to 3. Later US samples often sit nearer 2. This number is an assumption you type, not a live official estimate.

Direction

From an unemployment change, the growth gap equals minus the coefficient times that change. From a GDP growth gap, the unemployment change equals minus the gap divided by the coefficient.

Positive means the unemployment rate rose. Negative means it fell. Example: 1 means the rate moved from 4 percent to 5 percent. Type the change yourself. This is not a live BLS or ONS print.

Arithmetic

In words

Reciprocal slope

How to read this. The headline number is classroom arithmetic from numbers you typed. A negative GDP growth gap means real GDP growth sits below your trend assumption. A positive gap means growth sits above that trend. A positive unemployment change means the rate rises. A negative unemployment change means the rate falls. The reciprocal slope is 1 divided by the coefficient. With a coefficient of 2, that slope is 0.5, so each extra percentage point of growth above trend lines up with unemployment falling by about half a percentage point. None of these figures is a forecast of the next BLS, ONS, or BEA release.
Example defaults

Defaults use a coefficient of 2 and an unemployment rise of 1 percentage point. The implied GDP growth gap is minus 2 percentage points, so growth sits 2 points below trend. Switch to the growth gap direction and enter 2. The implied unemployment change is minus 1 percentage point, so the rate falls by 1 point. Those figures are classroom arithmetic. They are not a claim about current unemployment or GDP.

Educational only

Not investment advice and not policy advice. Okun's law is an empirical regularity, not a law of nature. Coefficients vary by country and by period. The mapping also misses hours, productivity, and people entering or leaving the labour force. Nothing here recommends buying, selling, or holding any security, or choosing a tax, spending, or interest rate. The calculator does not fetch live data.

The classroom formula

This page uses a simple difference form taught alongside Okun's 1962 discussion of potential output:

GDP growth gap ≈ minus Okun coefficient × change in unemployment
Change in unemployment ≈ minus GDP growth gap ÷ Okun coefficient

The GDP growth gap means actual real GDP growth minus trend or potential growth, in percentage points. The unemployment input is a change in the unemployment rate, also in percentage points. It is not the level of the rate. A coefficient of 2 is a familiar modern textbook starting point. It is the inverse of a slope near one half. Okun's 1962 rule of thumb was nearer a coefficient of 3, so a 1 point unemployment change lined up with about a 3 percent output gap. Research such as Ball, Leigh, and Loungani finds US slopes often nearer 0.4 or 0.5, which is a coefficient near 2 to 2.5, and finds that the number differs across countries. Say which coefficient you used.

For the ideas and the loose spots, read Okun's law explained. For the level version of slack, read the output gap. For a benchmark unemployment rate, which is a different question from a cyclical change, read the natural rate of unemployment.

Where to find the inputs

Type your own numbers. This page does not download official series. For a US sketch, look up the unemployment rate at BLS or on FRED (UNRATE) and real GDP at BEA or FRED (GDPC1). For a UK sketch, look up Labour Force Survey unemployment and real GDP at ONS. Then choose a trend or potential growth assumption and subtract it from actual growth yourself. Broader context sits on the unemployment pillar and the GDP pillar.

UK and US framing

Do not paste a US coefficient onto UK data and call the result a fact. Labour market institutions, hours adjustment, job support schemes, and survey definitions differ. A quarterly US growth rate that is annualised is not the same unit as a UK quarter on quarter rate. Match the units before you type. Use primary releases from BLS, BEA, and ONS.

Sources

All calculators · Taylor rule calculator · Okun's law explained · Output gap · Natural rate of unemployment · Unemployment topic · GDP topic · FAQ