The UK economics puzzle - rising employment but falling GDP

Here’s a conundrum. Why is employment in the UK economy rising (and unemployment falling) at a time when the economy is still shrinking?

The number of people out of work fell by 46,000 to 2.56 million in the three months to June 2012, according to the Office for National Statistics (ONS). But in the same period the UK’s national output is supposed to have shrunk by 0.7% - so what is behind the puzzling statistics?

Stephanie Flanders of the BBC examines this puzzle in this useful short video.

Of the 500,000 extra jobs created in the UK economy, over half are classified as “self-employed”; but are these really new entrepreneurs and startups? Or is it just a feature of the tax and benefits system where people have to register themselves as self-employed to benefit from various schemes.

Is it that firms in the UK are becoming less efficient or productive? Are businesses just hanging onto staff in the hope that the economy will improve.