Britain never had a double dip recession – and that doesn't matter

The magic of GDP revisions.

The ONS has released a bumper set of GDP revisions, taking a fresh look at the national output all the way back to 1997. The headline points:

  • The recession in 2009 was much more severe than previously thought. The agency has revised its estimate of the 2009 contraction from 4 per cent of GDP to 5.2 per cent; an increase of a third.
  • A change of 0.1 percentage points has erased the "double-dip" recession in 2011. The contractions in Q4 2011 and Q2 2012 still exist, but Q1 2012 is now estimated to have had exactly 0.0 per cent growth; the wiggle thus no longer qualifies as a technical recession.
  • Historically, the 2001 slump after the dot-com boom also appears to have been much worse than previously thought. Rather than the economy growing by 2.9 per cent that year, it grew by 2.2 per cent, a revision of 0.7 percentage points.

The immediate effect of the revision is political. The double-dip recession has been extraordinarily damaging for the Government, allowing the Opposition a concrete fact to point to to back up the claims that they "inherited growth and provided recession". The revisions eliminate the negative growth in one quarter, and mean that that period no longer meets the requirement of two or more consecutive quarters of negative growth which defines a recession.

But that is a technicality of the highest order. The estimate for growth over those three quarters combined is exactly the same as it was yesterday: a contraction of 0.6 per cent. All that has happened is that the timing of some of that contraction has shifted. Q2 2012 is now thought to be marginally worse, and Q1 2012 is now thought to be marginally better.

In other words, as I said back in April 2012, technical recessions don't matter. They impose an artificial dividing line between "good" and "bad" growth, when in fact, going by yesterday's stats or today's, that period is and always was mediocre. Horribly, cripplingly mediocre.

Anaemic growth is just as bad as a technical recession. In many ways, it's worse; whereas technical recessions are at least expected to end, the stagnation which we are living at the moment has stretched out for almost half a decade, and could well last almost half a decade more.

The more interesting fact is that the recession and depression have been massively increased in size. Since 2008, the economy has actually contracted by 1.1 per cent more than we thought. That increases the so-called "productivity puzzle": why has unemployment been falling while GDP hasn't been increasing? That puzzle is partially solved with the realisation that the labour market improvement stopped six months ago; but there still appears to be a disconnect between the two measures. The commonly cited solution to the puzzle is to argue that labour productivity has dropped; but even that just pushes the question further down the tree. Why is our productivity down so much?

But the number one take-home lesson from all of this is: GDP is actually kind of crappy. It's estimated from samples several steps removed from actually "measuring the size of the economy". It misses out huge sectors of the economy, from unpaid caring and parenting to increasingly mainstream aspects of the shadow economy like transactions in bitcoin. And it's wrong; sometimes for decades on end.

Perhaps we should take the advice of former MPC member Andrew Sentence (who has been predicting this recession would be revised out of existence for a year), and focus on more important and less volatile indicators like unemployment and business activity. Not only would that reduce the risk of rewriting history: it would also mean that doing well could no longer be defined as "not failing".

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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This is no time for a coup against a successful Labour leader

Don't blame Jeremy Corbyn for the Labour Party's crisis.

"The people who are sovereign in our party are the members," said John McDonnell this morning. As the coup against Jeremy Corbyn gains pace, the Shadow Chancellor has been talking a lot of sense. "It is time for people to come together to work in the interest of the country," he told Peston on Sunday, while emphasising that people will quickly lose trust in politics altogether if this internal squabbling continues. 

The Tory party is in complete disarray. Just days ago, the first Tory leader in 23 years to win a majority for his party was forced to resign from Government after just over a year in charge. We have some form of caretaker Government. Those who led the Brexit campaign now have no idea what to do. 

It is disappointing that a handful of Labour parliamentarians have decided to join in with the disintegration of British politics.

The Labour Party had the opportunity to keep its head while all about it lost theirs. It could have positioned itself as a credible alternative to a broken Government and a Tory party in chaos. Instead we have been left with a pathetic attempt to overturn the democratic will of the membership. 

But this has been coming for some time. In my opinion it has very little to do with the ramifications of the referendum result. Jeremy Corbyn was asked to do two things throughout the campaign: first, get Labour voters to side with Remain, and second, get young people to do the same.

Nearly seven in ten Labour supporters backed Remain. Young voters supported Remain by a 4:1 margin. This is about much more than an allegedly half-hearted referendum performance.

The Parliamentary Labour Party has failed to come to terms with Jeremy Corbyn’s emphatic victory. In September of last year he was elected with 59.5 per cent of the vote, some 170,000 ahead of his closest rival. It is a fact worth repeating. If another Labour leadership election were to be called I would expect Jeremy Corbyn to win by a similar margin.

In the recent local elections Jeremy managed to increase Labour’s share of the national vote on the 2015 general election. They said he would lose every by-election. He has won them emphatically. Time and time again Jeremy has exceeded expectation while also having to deal with an embittered wing within his own party.

This is no time for a leadership coup. I am dumbfounded by the attempt to remove Jeremy. The only thing that will come out of this attempted coup is another leadership election that Jeremy will win. Those opposed to him will then find themselves back at square one. Such moves only hurt Labour’s electoral chances. Labour could be offering an ambitious plan to the country concerning our current relationship with Europe, if opponents of Jeremy Corbyn hadn't decided to drop a nuke on the party.

This is a crisis Jeremy should take no responsibility for. The "bitterites" will try and they will fail. Corbyn may face a crisis of confidence. But it's the handful of rebel Labour MPs that have forced the party into a crisis of existence.

Liam Young is a commentator for the IndependentNew Statesman, Mirror and others.