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That 2013 Q4 Productivity Recovery, One Graph Version
UK Productivity, Deviation from Long-Run Trend
This data is slightly better than was expected, output/hour rose in absolute terms.
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Categories: Productivity
Ryan Avent tries to make sense of it all. Is the UK path “better” than the US as it means more people employed, at least. If not very productively.
http://www.economist.com/blogs/freeexchange/2014/02/labour-markets-0#comments
However, the US budget deficit is now approaching zero, while ours is still some way from that.
I think Marcus Nunes still gets it best, though.
http://thefaintofheart.wordpress.com/2014/02/19/ryan-avents-a-theory-of-troubles-from-a-mm-perspective/
It’s an interesting read but Britain really is “special” here. We did not see productivity rising in the recession – we have the exactly opposite. And I think I’ve said before I struggle to understand the argument that low real wages “lead” to lower productivity – it appears to be circular. The right question is why inflation is so high!
“Inflation so high”. It’s not. It’s just not. I wonder whether the ONS have made enough of the changed pattern of behaviour from the explosion in internet usage, doubled time from one work day a week online to two since 2006. And enough of the hedonic adjustments for quality of device and quality of online connection.
Fig 26 of …
http://stakeholders.ofcom.org.uk/binaries/research/media-literacy/adult-media-lit-13/2013_Adult_ML_Tracker.pdf
Maybe productivity has dived due to so much time spent online? But has quality of life deteriorated or gone up?
Scott Sumner often complains about the impossibility of measuring inflation, if producitivity is a partial derivative of inflation then …
Ha ha, you got me. Alright, I meant something like “why measured CPI has risen so much faster to nominal wages.” – and yes I say that exactly because our measurement of output & output/hour depend on the correct measurement of inflation. So hedonic adjustment is another suspect.
I like substitution stories too; the boom in UK online shopping is not what you expect from an apparently broken supply side. I read another Ofcom report which said online shopping here was much higher than other developed countries.
I agree about the circularity.
Perhaps we just measure things differently. I think it was Mark Sadowski who did some very good sleuthing around GDP measurement in the US vs UK, and left a very puzzled comment on Scott Sumner’s blog. It looks like the UK primarily uses the mysterious output measure and “corrects” the income and expenditure results. The US leads with the expenditure method, I recall.
And the US seems to keep things more “up to date” than us.
http://www.theguardian.com/commentisfree/2013/apr/23/recalculating-gross-national-product-hollywood
Perhaps the UK is just somehow missing large chunks of its output. Perhaps we just need more productive researchers at the ONS?
There is a nice article on the measurement of intangibles at the Economist today:
http://www.economist.com/blogs/freeexchange/2014/02/investment
I do like those stories, but I don’t think they go very far in explaining the depth of the productivity collapse.
I also had to kill some time in an outer London, somewhat downscale, shopping centre and couldn’t help but notice the throngs in Poundland (so successful it’s being IPO’d) and its peer, Poundvalue. I didn’t see the Aldi or other hard discount store, but you can see what they are doing to the market shares of Tesco and Morrison’s. Again, I’m not sure if the CPI catches these changing shopping habits for those with less, but these are significant moves in the market. I expect the boffins at the ONS are more like us, Waitrose-types, than 3 cans of Coke for a quid.
I totally agree. I have a post half-written about Poundland, quality and substitution after I saw their IPO announcement this week – impressive growth. It is all anecdotes though, it is hard to get data behind it.
You are right, data is hard to come by. The hard discounters are struggling to make profits, but do keep a good lid on profiteering.
http://www.shopperdoodledoo.co.uk/research/discount-retailing
And the pound stores do probably compete with the hard discounters and are probably a partial replacement of older versions like Woolworths.
In all, they may be just 7% of food sales, or less than 5% of all retail sales, but they will help keep the implied price deflator down. Now at an incredible low of just 0.2% YoY for January 2014.
http://www.ons.gov.uk/ons/dcp171778_353483.pdf
(Table ID1 is fascinating, really.)
At least volumes are now rising 4% YoY. So is RGDP running at 4% too?