One of the great mysteries surrounding the US economy is the seemingly inexplicable discrepancy between the plunging unemployment rate on one hand, which at 5.1% in August was the lowest since April of 2008 – a data point which on the surface would suggest virtually no slack in the labor force –  and the crawling pace of growth of the broader economy, on the other hand, namely the deterioration in US output and labor productivity, and the constant failure of wages to actually grow despite constant predictions by economists and pundits over the past 5 years that “wage growth is just around the corner.”

This relationship has had a name since 1962 when Arthur Melvin Okun first observed the empirical relationship between unemployment and losses in a country’s production. It is called Okun’s law.