Saturday, 6 October 2012

Who is right?

The Guardian (UK) this week raised the question of how the UK has managed to create jobs whilst GDP is falling.

It suggests that the answer must be that the productivity of the workforce is falling ... so we need more of them.

However, employment figures often lead or lag on economic performance.

An equally valid reason is that firms have confidence in the future and are hiring now to create future output.

Only time will tell which explanation is right.

The lesson, though, is not to accept the first explanation you are given - even though it may be plausible.

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