The past week has seen worse than expected GDP figures released for Q2 showing a preliminary 0.7% quarter-on-quarter decline – negatively impacted by the extra Jubilee holiday (and those days either side), poor weather and weak construction output. 

The extent of the underlying contraction in the economy is still difficult to separate from these exceptional factors. Yet by contrast, headline unemployment has continued its recent improvement, falling by 65,000 in the past three months and employment levels have risen by 181,000.

A further contrast is provided by VAT and National Insurance revenues, both showing healthy year-on-year growth in Q2. Confused? At first glance these figures may seem completely at odds but there are at least some partially mitigating factors. 

Underlying GDP decline is certainly overstated by the official data while, in response, unemployment will probably yet take a turn for the worse. Even so this cannot explain the divergence of VAT & NI contributions from the GDP trend. There is a mismatch here, which is presently confounding many economists.

Returning to the jobs market, on balance the stage appears to be set for a weaker second half in 2012 as the effects of first half contraction feed through into unemployment despite some private sector job creation. Historically unemployment may inconsistently lag GDP, implying it will reverse within the next few months. Already the narrower jobseeker claimant count – a more up-to-date measure albeit impacted by benefit policy changes – is on the rise again. 

Countering this, fewer jobs were shed through the cycle than in previous recessions and this double dip is also likely to see more job preservation than in past decades. The argument goes that if employers feel the downturn will be short-lived there will be a tendency to hold onto existing staff providing precious breathing room while the UK economy is re-balanced. Once again it comes down to confidence and economic visibility, factors which are very much driven by events across the Channel. The Eurozone crisis remains chronic, and until a resolution is found the underlying drivers of any economic growth here in the UK will remain muted. 

Back to recruitment with this past week’s crop of Q2 results. Similar to Manpower’s previously reported 1% decline, Randstad posted an organic 0.8% drop in its global sales as the gradual slowdown in Europe totalling 4% was mainly compensated by growth in its other key overseas regions. Impellam, with its UK and US operations, displayed almost 8% first half sales growth and, despite substantial margin pressure, delivered a strong operating profit performance from its recruitment businesses. The message so far from Q2 results is mixed across the global recruitment markets but the weakest areas are certainly in Europe, mirroring the economic impasse.