Unemployment and GDP: Example of Alabama

Abstract

This article focus on how the unemployment rate affects real Gross Domestic Product and uses data collected in Alabama state. By analysing recession periods recently, and conducting the Granger test, the outcome is that the unemployment rate is a granger-cause of real Gross Domestic Product, and the unemployment rate harms real GDP. A further implication of this result on the local governor of Alabama, the United States of America as well as similarly developed countries is that government should continue to regulate the unemployment rate by using methods such as subsidies to firms, attempts to eliminate information failures between employers and workers, and strategies to enhance labor quality should be considered.