Analysis: Why isn’t employment in Scotland rising?

By JOHN MCLAREN
Published on 02/02/2013 03:14

Yesterday’s new GDP figures for Scotland were not unexpected, in that they reflected a bounce back to growth in the third quarter of 2012, as had already been seen in the UK.

The most interesting aspect is that it appears to confirm the view that the productivity puzzle that is affecting the UK is not present in Scotland.

The productivity puzzle is – why is output (GDP) not rising when employment is rising? Or, put another way, with employment rising and output near flat over the past year, why is productivity of the average UK worker falling?

At the Scottish level, the puzzle does not appear to exist, as Scottish employment has not been rising.

The worry for Scotland is that it appears to be missing out on any new jobs being created at the UK level, regardless of their impact on GDP. The flip side is that Scotland does not appear to be suffering from the large decline in productivity.

While the UK and Scotland have performed similarly in terms of declining public-sector jobs, there has been no Scottish equivalent of the half a million-plus rise in private-sector jobs seen at the UK level.

The Olympics may have had some impact, however the picture is confused by other data.

The key points for politicians and officials are: (i) is the Scottish economy performing in a very different way to the UK post-recession? (ii) is the private sector in Scotland failing to create new jobs, and if so, why?