UK Economy
Some of UK's new jobs in recent years may be old ones
By Michael Hennigan, Finfacts founder and editor
Oct 23, 2013 - 3:19 AM

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A feature of the UK economy in recent years has been a plunge in labour productivity, and a rise in employment, suggesting that the UK needs far more workers to produce fewer goods than before the crisis. However, it was claimed on Tuesday that some of the new jobs may be old ones.

In Ireland we have argued that the popular ministerial talking point that 33,000 jobs were added in the year to June, may partly be counting jobs that were understated in previous periods.

In the UK, data last month from the Office for National Statistics (ONS) showed that output per hour was 16 percentage points below the average for the rest of the major industrialised economies in 2012, the widest productivity gap since 1994. On an output-per-worker basis, UK productivity was 19 percentage points below the average for the rest of the G-7 top industrialised countries in 2012.

Markit which produces monthly purchasing managers' index (PMI) data says ONS data indicate that, over the course of 2012, UK manufacturers took on 75,000 extra staff to produce £1.539bn fewer goods than the year before (or £2.412bn fewer goods in constant prices). 

The difference cannot be explained by the shift to part-time work, or reduced working hours: the ONS data show that 2.5m more hours were worked in 2012 compared with 2011.

Chris Williamson, Markit chief economist, says "Comparisons with the PMI survey indices relating to output show that the official data and survey data exhibit broadly similar trends over the 15 years for which comparisons are possible, albeit with the official data showing greater volatility (and perhaps being slightly stronger than the survey data over the past year).

However, the comparison with the PMI data on employment indicates that the survey and official data only show broadly similar correlations up to the financial crisis (albeit again with the official data showing greater volatility), after which the official data have signalled far stronger employment trends than the survey data. The divergence is particularly striking in 2012. In contrast to the strong employment growth signalled by the official data in 2012, the survey data are consistent with a marked drop in staffing levels."

The economist adds: "The re-modelled data suggest that manufacturing productivity has reverted to its long term trend, and even pushed above trend in early 2013."

Markit’s analysis suggested that in the the period between the second quarter of 2010 and the second quarter of 2013, the official estimate of new jobs created was more than 900,000 higher than the total suggested in the PMI surveys, or about 80% of the total jobs created in that period.

Markit said the disparity between the ONS and its data may result from tax changes: 86,720 extra firms were registered by the government between 2011 and 2013, partly due to changes to HMRC’s computer systems. Markit says the hypothesis is “speculation at this point”.

As well as fewer jobs, the private surveys similarly record far lower growth in hours worked, making the fall in the productivity of UK workers more easily explicable.

In a statement, the ONS said its employment surveys cover a vast range of jobs that other surveys may miss out, which “may explain part of the divergence of official statistics from survey-based measures” on jobs.

Research note [pdf]

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