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Obviously there are caveats with GDP, if you build a bridge to nowhere it counts as GDP, but if you mow your own lawn or volunteer to pick up garbage it doesn't count, and so forth and so on. However, assuming unemployment is low, then one could argue people would have less time to preoccupy themselves with volunteer work and contribute to the "economy" as measured by GDP.

I had Germany in mind at the time of writing, so use Germany as a default for the economy in question for this post. Nonetheless, at the risk of going too broad, I think this question can just as easily be posed for the general case. So feel free to broaden the scope beyond Europe.

Question

What is the prevailing theory behind a country exhibiting low unemployment but also low or even negative growth in gdp?

  • For brevity, you can specify which GDP you assume (inflation-adjusted, income approach or expenditure approach) or for robustness you can try to address low unemployment coupled with low gdp growth implications under all 3 measures of GDP
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    $\begingroup$ Maybe this question would be better if it were narrowed to something more specific like, "Why is Germany experiencing both low unemployment and low GDP growth?" $\endgroup$ – Kenny LJ Jun 12 at 4:52
  • $\begingroup$ Population decline and large scale wars can both clause low unemployment and negative GDP growth. The question is very broad. $\endgroup$ – Giskard Jun 12 at 5:11
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    $\begingroup$ @Giskard Perhaps I can only speak for myself, but I think the question is succinct and specific, but the answer to it can be broad. With that in mind, I tried to have answerers self-select into breadths they are most comfortable with by allowing latitude in assumptions. Perhaps this question format is taboo on SE, however the answer can still be super narrow if they choose one calculation of GDP and one country, but I don't see why I should exclude answerers from going the extra mile if they really want to, $\endgroup$ – Arash Howaida Jun 12 at 5:19
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One simple explanation can just be that unemployment is artificially low. Perhaps many people went out of the labor force (i.e. stopped looking for a job) after a long period of not being able to find one, and now they don't count as unemployed in the data. Similarly, maybe the economy is not growing enough to create good jobs, but many people are partially employed so that the unemployment rate looks artificially low again because even though people have jobs, they might want to work more hours, but can't.

There might be other more interesting causes, but I think that exploring them will require to zoom in a particular country and take into account the institutional details, etc.

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