# Okun’s Law Calculator

URL: https://speedycalculator.com/calculators/finance/okuns-law/
Last updated: 2026-10-25

> The Okun's law calculator relates unemployment and output: it estimates the output gap from the gap between actual and natural unemployment – or the unemployment change implied by GDP growth.

## Inputs

- Actual unemployment rate (%)
- Natural unemployment rate (%)
- Potential GDP
- Okun's coefficient
- Real GDP growth (%)
- Potential GDP growth (%)

## Results

- Output gap
- Estimated actual GDP
- Output lost
- Implied change in unemployment

## Formula

```
Gap version: (Y − Y*) ÷ Y* = −c × (u − u*), c ≈ 2
Difference version: Δu = −(1 ÷ c) × (GDP growth − potential growth)
```

## Explanation

Arthur Okun found that each percentage point of unemployment above its natural rate cost about 2–3% of GDP. The relationship is a rule of thumb that varies across countries and time.

### How to use the Okun's Law Calculator

- **Actual unemployment rate**
- **Natural unemployment rate**
- **Potential GDP**
- **Okun's coefficient**
- **Real GDP growth**
- **Potential GDP growth**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter the actual and natural unemployment rates, potential GDP and Okun's coefficient, and optionally GDP growth to estimate the unemployment change.

### Tips

- Use real (inflation-adjusted) figures to compare across years.
- Check whether data are seasonally adjusted.
- Use the same currency and base year throughout.
- Economic models simplify reality – treat results as illustrations, not forecasts.

### Common mistakes to avoid

- Mixing nominal and real values.
- Comparing percentage changes with percentage-point changes.
- Treating correlations as causes.

### Inputs explained

FieldWhat to enterActual unemployment rateIn %Natural unemployment rateIn %Potential GDPAmount in your currencyOkun's coefficientA numberReal GDP growthIn %Potential GDP growthIn %

### What each result means

- **Output gap** = 0 - [Okun's coefficient]×([Actual unemployment rate] - [Natural unemployment rate])
- **Estimated actual GDP** = [Potential GDP]×(1 + [Output gap]÷100)
- **Output lost** = [Potential GDP] - [Estimated actual GDP]
- **Implied change in unemployment** = 0 - ([Real GDP growth] - [Potential GDP growth])÷[Okun's coefficient]

### Example values

How the main result changes when **Actual unemployment rate** changes and everything else stays at the example values above:

Actual unemployment rate (%)Output gap (%)334.506-37.5-69-912-15

## Worked example

Inputs — Actual unemployment rate: 6 %; Natural unemployment rate: 4.5 %; Potential GDP: $24,000; Okun's coefficient: 2; Real GDP growth: 1 %; Potential GDP growth: 2 %.

Results — **Output gap = -3 %**; Estimated actual GDP = $23,280.00; Output lost = $720.00; Implied change in unemployment = 0.5 %.

## FAQ

**What is Okun's law?**
Each 1 point of excess unemployment ≈ 2% of output below potential.

**Is Okun's law exact?**
No – it's an empirical rule of thumb.

**What is Okun's coefficient?**
The ratio between the output gap and the unemployment gap, about 2 for the U.S.

**What formula does the Okun's Law Calculator use?**
Gap version: (Y − Y*) ÷ Y* = −c × (u − u*), c ≈ 2.