From Real Time Economics:
Economists in Britain have long been scratching their heads over the nation’s troubling “productivity puzzle.”
Now Markit,
the financial information provider that publishes the purchasing
managers’ indexes used to gauge activity in the global economy, has
tentatively suggested that former tax cheats might be muddying the
waters.
Britain has a bigger workforce than it did before it tipped into
recession in 2008 yet is producing far fewer goods and services. This
mismatch between output and jobs has led to a collapse in productivity, a
measure of how effectively an economy uses its resources that’s an
important driver of future growth prospects.
Official data suggest productivity in the U.K. is roughly 15% lower
than what it would have been had the economy continued on its
prerecession path and that British productivity has fallen behind that
of similar wealthy economies in the past few years.
The reason is that official data show many more people in Britain
have stayed in work than in previous recessions even though economic
output has nosedived. More surprising still, data show the economy
appears to have created many new jobs.
Quite why this has happened is the puzzling bit, and every economist
has a different explanation. Some reckon firms hung onto skilled workers
instead of laying them off. Some blame dysfunctional banks for leaving
unproductive firms alive instead of moving capital to slicker rivals.
Others cite a big increase in part-time jobs, self-employment and
freelancing.
In a report Tuesday, Markit suggested there’s no puzzle at all. By
analyzing three separate business surveys, including one of its own, it
concluded the official data may have massively overstated the number of
new jobs created in the economy, thereby exaggerating the fall in
productivity....MORE
