A PUZZLE: since last quarter, 181,000 more Brits are in work, but output is down 0.7%. What are these people doing, you might ask. The caveats are that the quarterly employment figures are from March to May, while GDP is measured April to June - and subject to revisions. But the enigma remains. Why, to put it crudely, are we consistently having more jobs and less stuff being produced?
The employment figures are convenient for the Chancellor George Osborne, who can wheel around to different television studios and say, "Nearly 400,000 more are in jobs since we came into office." But all the while, the economy has shrunk by 0.3% since May 2010.
There are three responses to this:
(1) Growth is being underestimated in the statistics. The Office of National Statistics (ONS) constantly revises its forecasts. At the start of the downturn, Q2 2008 GDP growth was first estimated to be 0.2%; the estimate is now -1.3%, a considerable quarterly plunge. Had policymakers known this at the time, they might have responded differently. This means we might see this quarter's growth revised up in future. The average absolute revision since Q1 2005 has been 0.4%, which means commentators could currently be arguing over the head of a pin. Nonetheless, the gap between GDP and jobs cannot be wholly explained by systemic underestimation.
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