Thread by @Gilesyb

Here are some staggeringly obvious points about Gross Value Added, employment, and therefore productivity (the first divided by the second). But they might lead to some insight into manufacturing, demand, etc following the excellent @jeegarkakkad thread yesterday 1/9

If you have only data on GVA and employment (L), and want to explain movements in GVA/L (prod), you can quickly see which plays the bigger role. It is GVA, full stop. See these charts, for Total UK economy ... 2/

... and also for Professional Services...3/

and retail.

This is all pretty obvious. The factors of production do not tend to move as quickly as the sales. Businesses are operationally leveraged: extra sales do not produce a proportionate rise in labour, capital etc. 4/

You see this most clearly in a sector like IT. In 1998-1999, output grew 15% and 19%, and employment only 3% or so each year. Anyway, guess which sector is the exception? 5/

...yup, you guessed it. Manufacturing. To be precise, manufacturing is the sector where productivity movements are as well explained by shifts in employment as in the topline, GVA 6/

If you prefer a line chart story, this tells it. UK manufacturing had a productivity boom in the 1990s - when it was cutting staff, not growing GVA 7/

A glimmer of hope for manufacturing enthusiasts: star countries like Germany have not showed the same pattern, though I found Spain did. Though you do not have a policy set to make us Germany ...

Anyway, it reiterates the point Jeegar makes here

https://twitter.com/jeegarkakkad/status/1415612985419177984

8/

And another one I am really fond of - AGGREGATE DEMAND MATTERS FOR PRODUCTIVITY. Certainly in the short run, but possibly over longer timescales too. As @billwells_1 likes to say, productivity is just a residual. You have GVA, and L, and it just spits out. 9/9

I realise this crucial chart is missing: the L vs GVA/L one