Okun’s Law

economics

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July 20, 2026

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Okun's Law is an economic principle that describes the relationship between a country's economic growth and its unemployment rate. It states that for every percentage point the economic growth rate exceeds the long-term potential growth rate, the unemployment rate will decrease by approximately one percent. This empirical relationship was observed by American economist Arthur M. Okun.1

The law is a useful tool for policymakers to understand the potential impact of economic growth on employment. However, it's important to note that Okun's Law is an empirical observation and can vary over time and across different economies. It is a key concept within income and employment theory, which seeks to understand macroeconomic factors for economic stability.123

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Arthur M. Okun
…of the widely cited “Okun’s Law,” which stipulated that for every 3 percent rise in the rate of economic growth above the economy’s long-term potential growth rate, unemployment would decrease by 1 percent. But during the turbulent 1970s, when stagflation (a stagnating economy with inflation) afflicted the country, the…
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…of the widely cited “Okun’s Law,” which stipulated that for every 3 percent rise in the rate of economic growth above the economy’s long-term potential growth rate, unemployment would decrease by 1 percent. But during the turbulent 1970s, when stagflation (a stagnating economy with inflation) afflicted the country, the…
Read More