Okun’s Law: Is it broken?

Okun’s Law suggested that an increase in output would imply a fall of unemployment, and the relation was often assumed to be a 2:1 ratio in more recent times.  Jon Hilsenrath suggested recently, in a WSJ blog, that the relation is broken.  He argues that the average growth between 2007 and 2009, the recession years, was around 2.5% below its trend (the actual growth was slightly negative, around –0.22% in the three years), and that Okun’s Law would have implied and increase of unemployment of approximately 5% (he says little more than 5%, from 4.4% to 8.9%” [sic]), but it increased more, reaching 10.1% in October 2009.  That is the basis for the claim that the law is broken.  In fact, the average annual unemployment increased from 4.6% in 2007 to 9.6% in 2010, precisely 5%.  His fears about the breakdown in the recovery are also exaggerated.  What is really surprising is that he thinks that: “unemployment seems to be falling sharply.”  I need to find these rosy goggles WSJ bloggers use.