A puzzle in recent UK economic data is that employment has risen despite a purported fall in GDP. The Labour Force Survey (LFS) measure of employees in employment rose by 146,000 or 0.6% between October and April (three-month moving average), while non-oil GDP is currently estimated to have fallen by 0.3% and 0.2% in the fourth and first quarters respectively.
The apparent contradiction could just reflect noise in the employment data. The recent rise in employees follows an equally-puzzling slump last summer, when the economy was supposedly growing moderately. The April employees number was 0.5% lower than a year before – more consistent with a reported rise of only 0.3% in non-oil GDP in the year to the first quarter, though still a smaller decline than would have been expected.
The puzzle, in any event, may be partially resolved by renewed softness in employment data this summer, judging from the Monster index of online job vacancies. Seasonally adjusted, the index rose in tandem with the LFS employees measure from late 2011 but has fallen sharply since April – see chart. The suggestion of weakness is confirmed by other recent evidence, including a plunge in the permanent placements index in the Markit report on jobs to its lowest level since 2009.
Labour market deterioration may deepen gloom about the economy even as prospects for late 2012 are improving, based on a revival in real money expansion across a variety of narrow and broad measures – see previous post.