Okun's Law and Movements over Time in the Unemployment Rate in Australia.

This article explains how movements in the unemployment rate reflect the relative rates of growth of employment and the labour force and are related to the participation rate, labour productivity growth and output growth. A framework is provided in which to analyse the determinants of movements in the unemployment rate. We look at the unemployment rate and its relationship to labour force and employment growth in the next section. In section 3 we define the participation rate and discuss how it relates to labour force growth. Then in Section 4, we consider Verdoon's Law and the relationship between output growth and employment growth. In Section 5 we combine the results in the previous section to determine the relationship between the unemployment rate and output growth. Finally, in Section 6, we summarise the findings. We begin looking at these questions by considering the way in which we measure the unemployment rate.