I’ve mentioned Brexit a time or two on the blog with sentiments ranging from mild doom, to the Russians will sure love this, to sympathy for the pro-Brexit base. But Andrew Sullivan, in the second part of his tri-partite weekly diary entry, wants to push me a little further along the path of embracing Brexit:
The surest economic forecasts made in the 2016 referendum campaign were that Brexit would be a catastrophe for the British economy. This was the view not only of the Remain campaign but of the U.K. government itself. The Treasury published a formal set of prognostications about Brexit’s economic impact in 2016 and they were grim: a recession immediately after the vote to leave, a jump in unemployment, and a soaring deficit. This was not a warning about the possible long-term future economic impact of Brexit, but about the immediate aftermath of the vote. And the Treasury was wrong. In the following three quarters, they predicted a cumulative decline of 0.3 percent, which would put the U.K. formally into a recession. In fact, growth has increased by 1.4 percent. There was no recession; and none has subsequently arrived.
Unemployment was 4.9 percent in mid-2016; in early 2020 it’s down to 3.8 percent, a near record low. More interesting is the employment rate: “The number of employed people rose by a sharp 180,000, its strongest in two years, and helped push the employment rate to another record high of 76.5%.” So Brexit has brought a bunch of people previously outside the workforce inside it, and generated more jobs than ever before. Compare Britain’s unemployment rate with France’s (8.1 percent) or Italy’s (9.8 percent) or Spain’s (13.8) or, more broadly, the eurozone (7.4).
Growth? Last year, the U.K. had slightly higher growth than the rest of the E.U., and the IMF just predicted that the U.K. economy would also grow marginally faster than the eurozone countries for the next two years, as long as there isn’t a screwup in the transition out of the E.U. During the referendum campaign, leading Tory and Leave politician Michael Gove was widely mocked for saying that Britons “have had enough of experts” when talking about the economy and Brexit. But it turns out that 51 percent of the people were right and almost all the experts were wrong.
Impressive, and, on its face, egg all over the face of numerous pundits, including myself, but we’re only a month or so into post-Brexit. Why are they even bothering to make and publish measurements? To my non-economist eye, this looks like eagerness exceeding good judgment.
So why the jump? It may be real, but it may also just be a “sugar high” as various entities adjust to new realities.
The employment numbers are probably real, though. As Sullivan points out, now the Brits control immigration, and masses of unskilled workers are no longer flooding the labor market. As a result, so long as employers need more unskilled workers, they’ll have to draw from who is already present, and that will, at least initially, force unemployment numbers down.
So Brexit remains an ongoing story. As it continues, a neglected substory, I predict, will be that of the proper selection of metrics to measure its consequences. It’s common to look at employment numbers, GDP, wage growth, and other measures of economic activity – but are those appropriate to measure the affects of a movement that restricts the free movement of people across borders in order to bring the appearance of control over their lives to the pro-Brexit base?
And those measures rarely, if ever, measure advancements in quality and new products. How do we tell if Great Britain is falling behind? Or advancing faster? There are some metrics, such as health metrics, but no overall metric – and perhaps that’s just as well. The quality to be measured is too diverse.
