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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Quiz: Can you identify fake news?

The furore around "fake" news shows no sign of abating. Can you spot what's real and what's not?

Hillary Clinton has spoken out today to warn about the fake news epidemic sweeping the world. Clinton went as far as to say that "lives are at risk" from fake news, the day after Pope Francis compared reading fake news to eating poop. (Side note: with real news like that, who needs the fake stuff?)

The sweeping distrust in fake news has caused some confusion, however, as many are unsure about how to actually tell the reals and the fakes apart. Short from seeing whether the logo will scratch off and asking the man from the market where he got it from, how can you really identify fake news? Take our test to see whether you have all the answers.



In all seriousness, many claim that identifying fake news is a simple matter of checking the source and disbelieving anything "too good to be true". Unfortunately, however, fake news outlets post real stories too, and real news outlets often slip up and publish the fakes. Use fact-checking websites like Snopes to really get to the bottom of a story, and always do a quick Google before you share anything. 

Amelia Tait is a technology and digital culture writer at the New Statesman.