“There is mixed news in the third quarter GDP figure. Quarterly growth of 0.5% is better than we’ve seen for a year but still well below par for the course in an economy that first emerged from recession two years ago. Moreover, adjusting for the knock on effects of the ‘special events’ that may have diminished growth in the second quarter and boosted it in the third, the ONS suggests that growth probably averaged just 0.25% in each of the second and third quarters.
“An underlying quarterly growth rate of 0.25% is better than nothing but barely amounts to an economic recovery. Growth at this rate is not only too weak to stem the rise in unemployment but increases the likelihood of a ‘job loss recovery’, that is where the economy expands but not by enough to prevent private sector employers from laying off staff.
“Even more worrying, however, is the possibility that the third quarter growth rate is the best we will see until the middle of 2012. Growth in the third quarter was still being supported by an expanding government sector. As this expansion wanes under the pressure of fiscal austerity, and with considerable uncertainty about the prospects for export sectors and consumer services sectors, the chances are that growth will be slower for at least the next two quarters. Add in the fact that a double-dip recession can’t be ruled out and it’s clear that today’s GDP growth figure may be better but not better enough for jobs.”
