John McLaren: Major shifts in economic fortune lie behind the fluctuating figures

The latest news on the Scottish and UK-wide labour market performances was mixed.

Figures showed the UK employment rate rising significantly, over both the previous quarter and versus a year ago. The change to the Scottish employment rate was marginal, over both the last quarter (positive) and the last year (negative). Meanwhile, Scotland’s unemployment rate rose a little in the last quarter and is still well up on a year ago.

In terms of whatever new jobs are being created, the latest data shows the biggest sectoral gains have been in the private sector side of services, in particular, business related services.

Interestingly, despite a 15 per cent fall in construction output since late 2010, the number of jobs in this sector is almost unchanged.

Overall, these changes have left Scotland and the UK in effectively the same labour market situation. However, the trends in how both got to this position are interesting.

Back in 2000, the Scottish employment rate was more than two percentage points lower than the UK’s and this was seen to be historically fairly typical. Over the period 2000 to 2008, this position reversed, so that by 2008, the Scottish employment rate was about 1.5 points above that of the UK as a whole. This Scottish advantage was maintained until 2010, since when it has largely disappeared

Unfortunately, the reasons for these changes in relative performance are not well understood, nor indeed even discussed, by successive Scottish governments. Hence, we are largely unaware how these fluctuating fortunes have come about.

In economic terms, such shifts are important. Given that the period 2000-8 was a time when the Scottish and UK economies were growing at similar rates, the better labour market performance suggests a serious relative fall in Scottish productivity.

Attempting to better understand how the wider UK economy works is important, not least because the underlying health of the economy has important policy implications. The weak GDP growth picture strengthens claims for a further fiscal stimulus, while the more positive labour market position suggests that a recovery may already be taking place.

Attempting to better understand how the Scottish economy works is also important, particularly in the lead-up to the referendum.

• John McLaren is at the Centre for Public Policy and the Regions