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).
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgj8fxHARvyTYFPJozA1S2OC-4sEYjWVV6G90mNK9S1xG6sgdC4y1LXXC8PKso-ZEvvkecED6UaJIW4gI4EEfnEg7ujn-wDca4Q87XIDxf8mZoKla62Ee0fFgRTfLmWF8fKRcsHErMYcQ/s400/payroll-gdpanal.png)
Source: Calculated Risk
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, et.al. all concur. Welcome to the new normal. For which nobody is prepared or preparing.
ReplyDeleteStarting with a similar set of observations my question is what are the implications and consequences for businesses (who create jobs bear in mind)?
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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.
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