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Reconciling Recent Strong Output Growth with Rising Unemployment

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Abstract

Over the last three years, robust GDP growth alongside comparatively weak labor market data on jobs and unemployment has presented a puzzle to policymakers and analysts. This disconnect shows up as elevated labor productivity growth and an unemployment rate that has risen despite robust GDP growth, violating the usual inverse relationship known as Okun’s law. We show that these data may be less puzzling than they appear. Historical revision patterns provide no evidence that recent productivity gains will be revised away. And once we account for lagged effects, the comovements of recent GDP and unemployment rate data are consistent with historical patterns.

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  • Dylan C. Jacobs & Pawel Krolikowski, 2026. "Reconciling Recent Strong Output Growth with Rising Unemployment," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2026(06), pages 1-9, March.
    • Handle: RePEc:fip:fedcec:102953
    DOI: 10.26509/frbc-ec-202606
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    1. Christopher J. Waller, 2025. "Cutting Rates in the Face of Conflicting Data: A speech at the Council on Foreign Relations, New York, New York., October 16, 2025," Speech 101964, Board of Governors of the Federal Reserve System (U.S.).
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