Understanding A Job-Creating Recession

The strange paradox of the UK economy post-2008 is that figures for output and figures for employment do not match. While the numbers that measure the actual output of the economy look disastrous, and increasingly so, the story on jobs is that many more of them are being created. The level of employment in the economy as a whole is up by 159,000 jobs in the 12 months to May. Even allowing for the fact that many of these are part-time jobs, this is still an impressive performance for an economy in deep recession. While the unemployment figures illustrated in the graphic are less encouraging, and show a clear divergence between the claimant count and the actual rate of unemployment, this still doesn not look like an economy suffering the worst downturn on record.

Part of this is undoubtedly resulting from the sorts of social factors that economic statistics can never capture; employers protecting their staff, perhaps because they value their skills or perhaps because they know their children; people protecting each other, even though there is not really enough work for them to do. The rhetorical attacks on the unemployed and all those who seek social support in times of crisis has also undoubtedly led many of those who are functionally unemployed to assign themselves to a range of more acceptable social categories, of which self-employment is the most popular.

On the other hand we may be observing what economists like to call a break in the trend, a historic shift in the relationship between some of the fundamental economic variables. One aspect of the change is the shift in the focus of productivity away from financial services and towards real economic output. After all if the financial sector is famed for creating money from thin air, a relatively labour-light process, then we cannot be surprised if the value-to-weight ratio of the economy is lower since that sector has massively contracted.

As in the case of the ending of growth, this may be another sign that the economy is already in transition towards a more sustainable pattern. If one of the features we are expecting is the rehabilitation of manual labour then we would expect to see a shift in the balance of productive assets away from capital and towards labour. This trend will speed up rapidly as we approach the exhaustion of fossil fuels or their prices rise as we begin to take climate change seriously. Perhaps the job generation that we are seeing now is already an indication of the green economist's claim that a green economy will be an economy that creates jobs.

This paradox is, in reality, not much of a paradox at all, but rather another indication that the way we measure our economy is not rational. If we had always measured output that really generated well-being, rather than counting money and counting jobs, we would have been able to formulate policies to reinforce what we value. This shift away from accounting to true economics could be one of the best outputs from this period in our economic history, which, in its own way, is proving particularly productive.
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Speaking Truth to Power

I have an exciting day this Wednesday and if any readers of this blog would like to join me for part of it that would be very welcome.

Back in the summer I put together some evidence for the Environmental Audit Committee's Inquiry into the Green Economy on behalf of the environmental thinktank Green House. As a result I have now been asked to give evidence to the committee members, who will ask me questions about how we might move towards a green economy.

This is, frankly, rather daunting, and it doesn't help that the sessions take place in the Thatcher Room of Portcullis House! My job appears to be to sit in the heart of government and tell them that the economic model we are working with is not only unsustainable but unjust and unstable into the bargain! The key target of government policy is entirely misguided.

In preparing for this I have come across a very interesting document called Enabling the Transition to a Green Economy. We can celebrate a small victory in that the draft version of this document was labelled as a Roadmap, something Green House criticised in our evidence. Like the report 'Keeping the Lights on' about energy a few years back, it makes clear the mental barriers to a sustainable future.

This report is not that encouraging, clearly identifying business rather than people as the key partner in the transition to a green economy. It focuses on efficiency and competitiveness, with no mention of the structural problems of a capitalist, growth-based economy. This is my clear task for Wednesday, and in the face of the evidence of the hegemony of business it is no wonder I feel rather daunted.

After the Commons I am moving down river to speak to the Occupy London protestors at their Tent City University. With luck I may be moved into the Bank of Ideas at the newly occupied former UBS building. I am calling my presentation 'The Audit-city of Hope', which doesn't quite work but you know what I mean. I hope to radicalise the demands beyond 'What do we want?' 'Better regulation of the banking sector'; 'When do we want it?', 'Within a reasonable timeframe'. My focus is going to be on building the energy to establish a national audit committee to find out who we owe the debt to and decide what proportion of it can reasonably be repaid.
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