The economic law relating changes in the unemployment rate to changes in real GDP is Okun’s law.
Named for American economist Arthur Melvin Okun, the relationship was first proposed in 1962. Its central idea is that when unemployment rises during an economic downturn, real output generally falls below what the economy could produce at full employment. Conversely, faster-than-normal growth is often associated with falling cyclical unemployment.
A commonly cited rule of thumb is that a one-percentage-point increase in cyclical unemployment corresponds to roughly a two-percentage-point decline in real GDP relative to potential output. The exact coefficient varies by country, period, productivity, hours worked, and labor-force participation, so Okun’s law is an empirical regularity rather than a fixed physical law.
It is often confused with the Phillips curve. The Phillips curve links unemployment with inflation, whereas Okun’s law links unemployment with output. Economists use Okun’s law mainly for short-run analysis and forecasting, not as a precise long-term calculator of GDP.