David Bell: Why our workers avoid worst of recession

Although this was a significant rise in joblessness, the Scottish unemployment rate of 6.9 per cent was well below the overall UK rate of 7.9 per cent, and significantly better than the rates of 10.1 per cent in the West Midlands and 9.2 per cent in London.

So why has Scotland's labour market not suffered as badly as elsewhere in this recession? From a historical perspective, such relative good fortune might not have been expected. Throughout the 1970s and 1980s, unemployment in Scotland was above the UK rate.

But during the last recession in the early 1990s, Scotland's unemployment rate did fall below the UK rate for the first time on record. The origin of that recession in the housing boom of the late 1980s may be part of the explanation. The Scottish housing market did not overheat to the same extent as the rest of the UK, and when the bubble burst, fewer Scots experienced negative equity.

Consumers and small businesses often use housing for collateral. So if house prices are falling, consumption and investment will be squeezed. This recession also has its origin in financial failure, and a similar credit squeeze may partly explain why Scotland's unemployment rate is below the UK rate.

But even from a current perspective, the relatively small rise in unemployment in Scotland is unexpected. The employment data shows that, between September 2008 and September 2009, Scottish employment fell by 2.3 per cent. But Scottish output fell by 6.1 per cent in the 12 months preceding June 2009.

Some businesses are using short-time working or other flexible working practices to hang on to valued workers when order books are weak. Some private-sector companies have agreed wage cuts with their staff.

It is too early to say whether such arrangements can survive in the long term. And if the public sector starts to contract, the key to avoiding unemployment in Scotland exceeding 200,000 will be some recovery of demand for the goods and services produced by the private sector during 2010.

David Bell is Professor of Economics, Stirling University