Economic Growth and the Unemployment Rate

Abstract

[Excerpt] Despite the resumption of economic (output) growth in June 2009, the unemployment rate remains at an historically high level almost three years into the recovery from the 11th recession of the postwar period. The unemployment rate has settled at a little over 8.0% during the first few months of 2012. The slow rebound of the labor market has renewed calls for measures to stimulate the economy beyond those Congress has previously enacted. It has, from time to time, prompted speculation about a so-called double-dip recession that might result from another shock to the U.S. economy (e.g., the slowdown of European economies). From a public policy perspective, the main driver of the unemployment rate is the pace of economic growth. This report first examines the long-run relationship between the two economic variables and then narrows its focus to the periods of recovery from the postwar recessions.