UK Gross Domestic Product and Unemployment


The rate of unemployment and its effects on the Gross Domestic Product in the United Kingdom has been an issue of concern for the last one decade. Since1971, the UK has maintained an average of 7.24% in its unemployment rate which has been impressive over the years (Miles 159). However, this has changed since 2014 as the economy recorded an unemployment rate decrease from the aforementioned average to 5.70%. This is the fastest decrease in percentage that the UK has ever experienced. According to statics, the total number of the workforce in September to November 2014 was 31.05 million people (Miles 162).

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This is the lowest rate that has been recorded since the major economic meltdown in 2008 although the pay growth rose above inflation (Linde, Stanley, and Doucouliagos 511). Statics have also shown the fluctuation of the GDP volumes from 2013 to 2014 economic analysis. For example, the annual GDP in 2013 increased by 1.7% (Linde, Stanley, and Doucouliagos 513). This increased in the subsequent year to 3.2% in 2014 which was a positive sign of domestic economic growth (Linde, Stanley, and Doucouliagos 513). However, the economic growth in the UK has been impressive for the longest time compared to any other economy.

Since 1992, the economy enjoyed a steady growth avoiding all the inflationary booms that were experienced through the decades (Dorsett 63). However, just like all the other great economies of the world the UK was badly affected by the 2007/2008 economic meltdown. Economic analysts argue that this was the worst economic calamity to ever hit the UK. The effect on the GDP was greater than the effects of the great depression of 1930s (Pessoa, and Reenen 546). Interestingly, the UK adopted several measures to recover from the calamitous economic depression through loosening of monetary and fiscal policy (Pessoa, and Reenen 550).

Although this was a major breakthrough to help the economy to recover from the economic hit, the UK was back in recession in the first quarter of 2012 (Gregg, Machin, and Fernández‐Salgado 426). This was a deeper recession and it was caused by a number of economic factors. One of the major factors was the European recession that was experienced in the region. In addition, the austerity measures taken by the UK in an attempt to influence an economic recovery caused lower confidence in the economy hence reducing the rate of investments and borrowing (Gregg, Machin, and Salgado 430).

Lastly, the UK experienced weak bank lending and the real income rates were falling at this time. Nonetheless, from 2013 the UK has been experiencing a steady and positive economic growth. In fact, the UK is one of the top best economic performers in the UK. However, its economic growth has not influenced the GDP to rise to the level of its pre-crisis peak of 2007 (Gregg, Machin, and Salgado 430). Economists are still skeptic of the UK’s stability given the recovery measures that were used to save it sinking economy.


The economic growth and the rate of unemployment is notably strong in the service sector compared to other sectors such as manufacturing and the industrial sectors (Dorsett 63). Another factor that is leading to more doubt of the economic stability in the UK hence the high rate of unemployment is the loose monetary policy. As the unending speculations continue to take center stage, the economy is still improving and it might not go back to its previous level in the near future. To measure the level of unemployment in an economy, one needs to understand unemployment (Dorsett 63).

UK Inflation and Economic Growth

This is a graph showing the inflations rate in the UK from 1990 to 2012. From the 2010, inflation has been rising although towards the end of 2011 it dropped significantly.

UK unemployment and economic growth

This graph represents the economic growth in the UK and its effects on the employment rate from 1978 to 2014.

Real GDP Growth UK

This is graphical represeantation of the gross domestic product gowth in the UK from 1955 to 2013.

Real GDP Growth UK

This is graphical represeantation of the gross domestic product gowth in the UK from slipt into two quarters from the year 2000 to 2014.

Works Cited

Dorsett, Richard. “The effect of temporary in-work support on employment retention: evidence from a field experiment.” Labour Economics 31 (2014): 61-71.

Gregg, Paul, Stephen Machin, and Mariña Fernández‐Salgado. “Real wages and unemployment in the big squeeze.” The Economic Journal 124.576 (2014): 408-432.

Linde Leonard, Megan, T. D. Stanley, and Hristos Doucouliagos. “Does the UK Minimum Wage Reduce Employment? A Meta‐Regression Analysis.” British Journal of Industrial Relations 52.3 (2014): 499-520.

Miles, David. “Inflation, Employment, and Monetary Policy: Objectives and Outcomes in the UK and US Compared.” Journal of Money, Credit and Banking 46.S2 (2014): 155-167.

Pessoa, João Paulo, and John Van Reenen. “The UK productivity and jobs puzzle: does the answer lie in wage flexibility?” The Economic Journal 124.576 (2014): 433-452.

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