Can there really be jobs growth in the depths of recession?
If the GDP figures and employment statistics are to be believed, then this would seem to be the case in the UK. It is hard for anyone with a basic understanding of economics to fathom how this is possible, as in theory jobs growth will lead to increased productivity and economic growth. Put simply, more jobs = more output = more money. Now I am no economist, but this makes sense to me.
However, when you examine the statistics further, there are several factors which could help to explain the confusion. The first of which is the decline in productivity in the UK. While many argue that the economy is in better shape than we are letting on, there is a notable decrease in productivity, which is approximately 3.8% lower than it was 4 years ago. So, while there are new jobs being created, those in work are not as ‘productive’ as they used to be, therefore contributing less to our economy.
To explain this further, we must also look to the ‘types’ of jobs being created, and in what sectors. The historically highly productive financial services sector in the UK is cutting jobs due to the financial crisis, whilst jobs are being created in less productive sectors. For example, in the finance and insurance sectors alone, there were 45,000 fewer jobs in June 2012 than in March 2008. By contrast, the hospitality and services industry - whose average employee produced only a fifth of the output of a financial worker four years ago - has added 103,000 jobs. Combine this with lower salaries leading to people spending less and you have one way of explaining jobs growth without economic growth.
More jobs being created is a positive thing, that much is certain, but I fear that the increase in numbers is down to people accepting uncertain part time/temp jobs to avoid unemployment. While this is a short term solution, the job satisfaction and security tends to be low. Moreover, those in this situation are less likely to spend and even less likely to be accepted for a loan or a mortgage. Therefore the old adage of 'any job is better than no job' could well be skewing the figures.