Okun Shrugs With Productivity Plunging, Labor Costs Surging, And Claims Improving

Zero hedge ^

[Perdogg]

Initial claims were expected to rise modestly to 355k from last week's noisy 344k print (which was revised up) but instead (seasonally-adjusted of course) they improved to 340k (from a revised 347k). However, non-seasonally-adjusted claims rose at their fastest rate of the year. Adding fuirther confusing salt to the wound, as we noted here, it seems Okun's Law is broken, with productivity dropping at its fastest since Dec 2008, unit labor costs surging at their fastest since in 11 months - and all with GDP going nowhere and initial claims improving.



as Productivity and labor costs diverged...



Charts: Bloomberg

[The Great RJ]

From my understanding of Okun’s Law for every percent of unemployment above the natural rate of unemployment there is a two percent loss in potential GDP. If we assume the natural rate of unemployment was about 5% as it was during the Bush years our GDP could be as much as 8% greater. What Obama is doing is trying to make our natural rate of unemployment appear to be 8% or more ..on par with EU socialist nations.