Thursday, 13 September 2012

The UK's recession: long and large, or short and shallow?

Chris Giles publishes a post today commenting on the NIESR graph of the UK's recession, which has become rather well-known.  The reason is that it shows the current recession as being long and large in relation to others:

Source:  NIESR, via FT.

Chris then cautions us that this is an graph of one measure of recession, namely real output.  What about employment?  Here we have it

Source: FT 

And it shows the opposite, namely the recession is short and shallow.

Let me put my productivity hat on and add a third dimension.  As Krugman is fond of saying, productivity isn't everything, but in the long run its almost everything, since it determines long run living standards. The excellent Joe Grice, Chief Economist from the ONS gives us the equivalent graph for output per hour: here it is:

Source: chart 2 in  Grice, J (2012) ‘The Productivity Conundrum, Interpreting the Recent Behaviour of the Economy’, ONS website.  

Of course, this combines the information in the other two graphs, but I would argue is a third interesting piece.  As the top line shows, the productivity recovery from the 1990 recession was fast, that recession being comparatively mild.  The recovery from the 1980 recession, next line down, was the start of the Thatcher productivity miracle and so was very quick.  The recovery from the 1973 shock makes salutary reading: that signalled a worldwide productivity slowdown, that continued until the ICT boom in the 1990s.  The current recovery looks scarily like that, though we don't at present have much idea on whether there is some underlying technological slowdown explaining it.