Productivity's down, but can it recover?

There probably isn't a long-term drop in productivity.

The standard explanation for the divergence between the (quite good) employment data and the (abominable) GDP data is that productivity has, for whatever reason, plummeted.

Various explanations have been proffered. It may be that the productivity slump is specific to this recession, and is caused by the government's desperate desire to "rebalance" the economy from the public to private sectors. If it's achieved this by laying off a lot of productive workers, they will find themselves working less well in their new jobs in the private sector, and so there will be a productivity slump – even while employment goes up.

Alternatively, the productivity slump might be a short-term effect of the slump. In this recession, for whatever reason, the drop in demand didn't lead to people laying off workers, but instead caused them to keep them on in the hope that the slump would end and they could start using their slack capacity again. This is the preferred explanation of Free Exchange, which writes:

Supporters . . . argue that high inflation doesn't mean there is no capacity in the UK economy: recent high inflation was down to a rise in commodity prices and the VAT increase; it has since dropped. Business surveys are often unreliable and don't account for what happens when demand picks up. The financial crisis doesn't explain everything: look at the USA and Spain. These countries have had much stronger productivity growth. Indeed, Bill Martin and Robert Rowthorn, of Cambridge University, have lent much support to this "temporary" explanation in a May publication. They show that the shift in jobs from high- to low-productivity sectors only amounts to a 1/4 percentage point of the productivity shortfall.

Then, of course, there is the argument that there isn't actually any problem at all. The FT reports

The single biggest puzzle for economists is the fact that the GDP data simply do not tally with the message from the labour market which is that employment, and the number of jobs, are growing. “It is difficult to reconcile the weakness of today’s [Wednesday’s] official GDP data with any other indicator of economic or labour market activity,” said Kevin Daly, economist at Goldman Sachs.

Mr Daly noted that in the three months to May, employment rose by 0.6 per cent or 182,000 jobs while the unemployment rate fell by 0.2 percentage points to 8.1 per cent. That, he said, was consistent with annualised GDP growth of 1.0 to 1.5 per cent for the second quarter.

It's Goldman Sachs versus the ONS. Of course, last quarter it was Goldman Sachs versus the ONS as well, and the ONS were very definitely proved right. Don't expect much different this time.

Osborne isn't too happy. Photograph: Getty Images

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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Theresa May’s stage-managed election campaign keeps the public at bay

Jeremy Corbyn’s approach may be chaotic, but at least it’s more authentic.

The worst part about running an election campaign for a politician? Having to meet the general public. Those ordinary folk can be a tricky lot, with their lack of regard for being on-message, and their pesky real-life concerns.

But it looks like Theresa May has decided to avoid this inconvenience altogether during this snap general election campaign, as it turns out her visit to Leeds last night was so stage-managed that she barely had to face the public.

Accusations have been whizzing around online that at a campaign event at the Shine building in Leeds, the Prime Minister spoke to a room full of guests invited by the party, rather than local people or people who work in the building’s office space.

The Telegraph’s Chris Hope tweeted a picture of the room in which May was addressing her audience yesterday evening a little before 7pm. He pointed out that, being in Leeds, she was in “Labour territory”:

But a few locals who spied this picture online claimed that the audience did not look like who you’d expect to see congregated at Shine – a grade II-listed Victorian school that has been renovated into a community project housing office space and meeting rooms.

“Ask why she didn’t meet any of the people at the business who work in that beautiful building. Everyone there was an invite-only Tory,” tweeted Rik Kendell, a Leeds-based developer and designer who says he works in the Shine building. “She didn’t arrive until we’d all left for the day. Everyone in the building past 6pm was invite-only . . . They seemed to seek out the most clinical corner for their PR photos. Such a beautiful building to work in.”

Other tweeters also found the snapshot jarring:

Shine’s founders have pointed out that they didn’t host or invite Theresa May – rather the party hired out the space for a private event: “All visitors pay for meeting space in Shine and we do not seek out, bid for, or otherwise host any political parties,” wrote managing director Dawn O'Keefe. The guestlist was not down to Shine, but to the Tory party.

The audience consisted of journalists and around 150 Tory activists, according to the Guardian. This was instead of employees from the 16 offices housed in the building. I have asked the Conservative Party for clarification of who was in the audience and whether it was invite-only and am awaiting its response.

Jeremy Corbyn accused May of “hiding from the public”, and local Labour MP Richard Burgon commented that, “like a medieval monarch, she simply briefly relocated her travelling court of admirers to town and then moved on without so much as a nod to the people she considers to be her lowly subjects”.

But it doesn’t look like the Tories’ painstaking stage-management is a fool-proof plan. Having uniform audiences of the party faithful on the campaign trail seems to be confusing the Prime Minister somewhat. During a visit to a (rather sparsely populated) factory in Clay Cross, Derbyshire, yesterday, she appeared to forget where exactly on the campaign trail she was:

The management of Corbyn’s campaign has also resulted in gaffes – but for opposite reasons. A slightly more chaotic approach has led to him facing the wrong way, with his back to the cameras.

Corbyn’s blunder is born out of his instinct to address the crowd rather than the cameras – May’s problem is the other way round. Both, however, seem far more comfortable talking to the party faithful, even if they are venturing out of safe seat territory.

Anoosh Chakelian is senior writer at the New Statesman.

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