Positive Job Figures Confuse Economists
The unemployment figures for Q2 2012 have been quite encouraging: The number of people in work actually rose by 201,000. Unemployment fell by 46,000.
However, in the same period GDP shrank by 0.7% according to figures from the Office of National Statistics (ONS).
As the BBC’s Economics Editor, Stephanie Flanders put it so succinctly in her blog last week:
“it’s not necessarily good news that collectively, as a nation, we seem to be needing to hire a lot more people, to make less stuff.”
There are a couple of theories to explain the anomaly:
One is that the ONS might actually be wrong and they will have to look at the data again to see if their growth forecast was correct or not. Chief economist at the British Chambers of Commerce (BCC), David Kern, said:
“Overall, these figures show positive trends in the UK labour market and are difficult to reconcile with other ONS figures, which show three consecutive GDP declines since the end of 2011. If both sets of figures are correct, they imply large declines in productivity, which seems implausible. It is my belief that this could lead to revisions to the GDP statistics in due course.”
Another possibility is that, in accordance with what Stephanie Flanders said, there may well be a lot more self-employed people around these days who, whilst not officially classified as unemployed may be struggling to get any work in: More people, less stuff.
The "Olympic Effect" may be another factor with part-time workers making up the numbers of in-work people. The Federation of Small Businesses (FSB) has alluded to this with the FSB National Chairman, John Walker, saying:
“While it is good that people are in jobs, these jobs are mainly part-time when people would prefer full-time work. Small businesses are key to sustaining the recovery but they need to be supported in enabling a greater number of people to be in full-time work.”
Latest figures from the ONS on the labour market point to an increase in part-time workers over the last year, rising by 2.2% in 12 months and self-employed people up by 8.2%
Gerwyn Davies, labour market adviser at the Chartered Institute of Personnel and Development (CIPD), believes that there may be an issue with "over-staffing" and the fact that some employers may be holding on to more staff than they need in order to retain their skills. Davies added:
“This is a make-or-break moment for employers — unless growth picks up many will find that they cannot hold on to some workers any longer.”
The confusing gain in employment coupled with reduced national output was summed up by Graeme Leach, chief economist at the Institute of Directors (IoD), who said:
“The only certainty in the latest labour market figures is uncertainty.”