We're working more, but doing less: why GDP is so low

Productivity is down year-on-year for the fourth quarter in a row.

Why has GDP been stagnating even while employment and hours worked have been rising? One answer to the question is to point out that the rise in the employment rate has been somewhat overstated; There was a persistent rise for around a year, but that seems to have levelled off in recent months. Furthermore, at a period when the economy was growing, the employment rate was actually flat. It could just be catch-up growth in employment that we are seeing.

But even with those explanations, there's still something to explain. The employment rate has flatlined, but overall employment has continued to grow (although even that dropped off in the first quarter of 2013):

 

Overall employment is a bad measure to use to judge the success of a government, because it has a tendency to rise anyway, thanks to population growth. (Which is why, unsurprisingly, this government is fond of quoting it. "More people in work than ever before" is technically true, but only because there are more people in Britain than ever before.) But it is important for one reason: more people ought to mean more people making things, which ought to mean higher GDP. The fact that it doesn't is worrying.

That's why economists turn to measures of labour productivity, which tell us things like how much output the average worker produces, or how much output is produced per hour. If the country is getting richer, but only because we are working longer hours, for instance, the former measure will rise, but the latter won't. If the country is getting richer, but only because more people are working, then the latter will rise, but the former won't.

We are in the opposite situation. The country isn't getting richer, but more people are working, and they're working longer. And so, as you'd expect, that means both key measures of productivity, released today, are falling:

The ONS adds:

Whole economy output has risen slowly during 2012, while employment and hours rose at a much faster rate. Labour productivity has therefore fallen over the past year on all measures - although it rose in the first quarter of 2013 on an output per worker and output per job basis as employment stagnated while output increased. The weakness in productivity has not been translated into rising unit labour costs, which have fallen over the past year because of the weakness of earnings growth.

As I said yesterday, though, falling labour productivity doesn't solve the puzzle. It just raises a different question: why?

It could be that the slump is to do with the Government's attempt to rebalance the economy from the public to the private sector. If you lay off a lot of talented people in high-productivity jobs and force them to work in a sector which caters to a slightly different set of skills, they may well end up being less productive, especially for the time it takes them to learn how to do their new job.

Alternatively, it may be that employers didn't lay off every employee they could have, instead choosing to keep them on in the hope that, when the depression is over, they won't have to rehire. In that explanation, the drop in productivity is because there isn't enough work to keep all the workers busy. That's the preferred explanation of the Economist's Free Exchange blog, but it doesn't explain why the number of hours worked have risen at the same time.

We have a weak economy. Hopefully it won't stay that way for too much longer.

Working hard or hardly working? A participant in the Chap Olympics competes in a round of Not Playing Tennis, the aim of which is to make the least possible effort to play tennis. 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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Donald Trump vs Barack Obama: How the inauguration speeches compared

We compared the two presidents on trade, foreign affairs and climate change – so you (really, really) don't have to.

After watching Donald Trump's inaugural address, what better way to get rid of the last few dregs of hope than by comparing what he said with Barack Obama's address from 2009? 

Both thanked the previous President, with Trump calling the Obamas "magnificent", and pledged to reform Washington, but the comparison ended there. 

Here is what each of them said: 

On American jobs

Obama:

The state of our economy calls for action, bold and swift.  And we will act, not only to create new jobs, but to lay a new foundation for growth.  We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.  We'll restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost.  We will harness the sun and the winds and the soil to fuel our cars and run our factories.  And we will transform our schools and colleges and universities to meet the demands of a new age.

Trump:

For many decades we've enriched foreign industry at the expense of American industry, subsidized the armies of other countries while allowing for the very sad depletion of our military.

One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind.

Obama had a plan for growth. Trump just blames the rest of the world...

On global warming

Obama:

With old friends and former foes, we'll work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.

Trump:

On the Middle East:

Obama:

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy. 

Trump:

We will re-enforce old alliances and form new ones and unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.

On “greatness”

Obama:

In reaffirming the greatness of our nation we understand that greatness is never a given. It must be earned.

Trump:

America will start winning again, winning like never before.

 

On trade

Obama:

This is the journey we continue today.  We remain the most prosperous, powerful nation on Earth.  Our workers are no less productive than when this crisis began.  Our minds are no less inventive, our goods and services no less needed than they were last week, or last month, or last year.  Our capacity remains undiminished.  

Trump:

We must protect our borders from the ravages of other countries making our product, stealing our companies and destroying our jobs.

Protection will lead to great prosperity and strength. I will fight for you with every breath in my body, and I will never ever let you down.

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland