Assuming that the labour force is no longer
constant, therefore any changes in employment are not reflected one-to-one in
contrasting changes in unemployment, a contrast is created with the connection
between change in unemployment rate and output growth.  This relationship is explained by Okun’s law,
which states that a one point increase in unemployment is associated with an
increase of two percentage points of negative growth in GDP.  Therefore, let u, denote the unemployment
rate in the year t, whilst ut-1, is the unemployment rate in year t-1 and gyt
is the growth rate of output from year ‘t-1’ to year ‘t’ (Blanchard, 2013).  Therefore, the following
relation emerges: