Labour productivity is falling. Today's figures show that total hours worked have risen 1.6% in the last year, whilst the NIESR estimates that GDP fell 0.2% in the time. GDP per hour is now 4.5% below 2007Q4's level. Had productivity continued to grow at its 1977-2007 rate, it would be 10.8% higher.

Now, some of the productivity shortfall reflects Q2's temporary Jubilee-induced drop in GDP. And maybe some of it is due to GDP being under-recorded and/or hours being over-recorded; there is, remember, considerable sampling error in the employment data.

But this cannot be the whole story. It cannot explain all of the 13.7% gap between where productivity is and where it would be, had past trend growth continued.

So, what can explain this? A strong candidate is labour hoarding (pdf); firms have been hanging onto workers in the hope (pdf) of an upturn in demand.

I don't deny that this is part of the story, maybe a large part. But three things make me doubt that it's the whole story.

1. Labour hoarding should be reversing now. Between 2007Q4 (the cyclical peak) and 2009Q3, GDP fell 7% whilst hours worked fell 3%. This tells us there was considerable labour hoarding in the early stage of the crisis.In a normal recession/recovery, this process would be unwinding now, as some firms enjoy rising production whilst others give up hope and cut staff. But it isn't happening. Since 2009Q3, GDP has grown 2.4% whilst hours have risen 2.8%.

2. Companies in aggregate want to pay off debt or raise cash. Why then should they be unusually keen to jeopardise cashflow by retaining staff?

3. If we were seeing labour hoarding in a weak economy, there should be a drop in the job separation rate and therefore a low level of unemployment, given the level of vacancies. But this doesn't seem to be happening. In the last 12 months, the change in unemployment has been pretty much what you'd expect, given the small rise in vacancies.

These doubts make me fear that something else is at work - that maybe there is a genuine productivity slowdown. Two things lend credence to this:

- One effect of the financial crisis is to starve new firms of the finance to expand. This retards the creative destruction which is key to productivity growth. A lot of this growth, remember, comes not from existing establishments increasing their efficiency, but from workplaces closing down and being replaced (pdf) by newer ones. Anything that slows this external restructuring is bad for productivity.

- Even before the crisis, firms were holding back on investment. This should lead to slower productivity growth. This is partly because it means workers are using less efficient capital; they spend their time cussing servers and printers rather than working. But it's also because a lack of investment is a symptom of pessimism about future growth - a pessimism which seems to be correct.

Now, I don't say this to dismiss labour hoarding or mismeasurement as possible explanations. All I'm saying is that the productivity puzzle is a deep one. And I'm not sure it has a happy solution.