Monday, December 7, 2009

Payroll and GDP

Calculated Risk looks at the strong relationship between Employment and Real GDP:

This shows that real GDP has to grow at a sustained rate of about 1% just to keep the net change in payroll jobs at zero.
A 3% increase in real GDP (over a year) would lead to about a 1.5% increase in payroll employment. With approximately 131 million payroll jobs, a 1.5% increase in payroll employment would be just under 2 million jobs over the next year - and the unemployment rate would probably remain close to 10%.
The following chart summarizes a table presented in the post, which is a quick and dirty way to estimate real GDP growth rates over the next 12 months time under a variety of employment scenarios (and what the unemployment rate would be at those levels).

Source: Calculated Risk


  1. Jake - nice translation. CR's argument is hopefully another wake up call. OMB outlook is for long-run growth at 2.5% thru 2019. CBO, IECD, all concur. Welcome to the new normal. For which nobody is prepared or preparing.
    Starting with a similar set of observations my question is what are the implications and consequences for businesses (who create jobs bear in mind)?
    Response vs. Performance: Walking Wounded & Mental Attitudes

  2. Likely the other way around, too. An increase in payrolls will lead to an increase in GDP which, hey, might lead to an increase in payrolls.