Unemployment down, but where's the growth?

More people are in work, but things aren't necessarily better

Some more good news from the labour market figures this month. Unemployment was down 0.2 per cent or 51,000 people quarter on quarter, while employment was up 0.3 per cent or 133,000. The fabled "rebalancing" appears to finally be upon us, with public sector employment shrinking by 39,000 but amply being made up for by an increase of 205,000 in the private sector.

Even some of the nasties that have been present in the last two month's data are gone now. The number of people working full-time finally rose by 82,000, matching a continued increase in the number of people working part-time (up 83,000). Similarly, the number of people temping against their will fell slightly, with 5,000 fewer people working temporary jobs because they couldn't find permanent work.

Underemployment is still growing overall, though. Another 25,000 people are now working part-time because they can't find full-time work. But overall, the labour figures are surprisingly positive.

I say surprisingly, because they certainly seem to conflict with the reports from the wider economy. We have had two straight quarters of negative growth, and are widely expected to be in the midst of a third (the pre-spinning began even before the quarter did, with the Jubilee Weekend being blamed). So how can we have a strong labour market?

Some commentators are using the unemployment data to cast doubt on the GDP data, but that is largely clutching at straws. It's long been known that the two can diverge quite seriously – witness, for example, the American situtation, where the unemployment rate has fallen by almost 2 per cent since November 2009 with growth which (while good in comparison to the UK) is less than the fall would suggest – and it is not beyond the realm of possibility that we are experiencing a growthless recovery.

The simplest way for the two to head in seperate directions is a fall in labour productivity. This is the measure, basically, of how much is made in one hour of work by one person; although it does count literally how hard people work, it is affected far more by technology and workplace innovations. The last data release, for the fourth quarter of 2011, showed productivity falling by 0.7 per cent, and it would be unsurprising if we saw further falls for the first and second quarters of 2012.

The economic story for falling productivity in a recession is simple and relatively intuitive. When times are hard, employers are less likely to spend money on training, tools, repairs to machinery, and so on; all the sort of things which let an employee work harder and smarter. This is compounded by the fact that labour is relatively sticky; while a business doing well will spend on hiring and productivity improvements, a business doing badly is far less likely to fire their employees than they are to cut back on productivity-boosting spending. Simply put, recessions lead to drops in productivity (source):

So it is absolutely possible to be in the situation we are now, with falling unemployment and a contracting economy. It's just not entirely pleasant.

Chris Grayling, Minister for Work and Pensions, and Chris Grayling, Minister for Work and Pension. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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What Jeremy Corbyn gets right about the single market

Technically, you can be outside the EU but inside the single market. Philosophically, you're still in the EU. 

I’ve been trying to work out what bothers me about the response to Jeremy Corbyn’s interview on the Andrew Marr programme.

What bothers me about Corbyn’s interview is obvious: the use of the phrase “wholesale importation” to describe people coming from Eastern Europe to the United Kingdom makes them sound like boxes of sugar rather than people. Adding to that, by suggesting that this “importation” had “destroy[ed] conditions”, rather than laying the blame on Britain’s under-enforced and under-regulated labour market, his words were more appropriate to a politician who believes that immigrants are objects to be scapegoated, not people to be served. (Though perhaps that is appropriate for the leader of the Labour Party if recent history is any guide.)

But I’m bothered, too, by the reaction to another part of his interview, in which the Labour leader said that Britain must leave the single market as it leaves the European Union. The response to this, which is technically correct, has been to attack Corbyn as Liechtenstein, Switzerland, Norway and Iceland are members of the single market but not the European Union.

In my view, leaving the single market will make Britain poorer in the short and long term, will immediately render much of Labour’s 2017 manifesto moot and will, in the long run, be a far bigger victory for right-wing politics than any mere election. Corbyn’s view, that the benefits of freeing a British government from the rules of the single market will outweigh the costs, doesn’t seem very likely to me. So why do I feel so uneasy about the claim that you can be a member of the single market and not the European Union?

I think it’s because the difficult truth is that these countries are, de facto, in the European Union in any meaningful sense. By any estimation, the three pillars of Britain’s “Out” vote were, firstly, control over Britain’s borders, aka the end of the free movement of people, secondly, more money for the public realm aka £350m a week for the NHS, and thirdly control over Britain’s own laws. It’s hard to see how, if the United Kingdom continues to be subject to the free movement of people, continues to pay large sums towards the European Union, and continues to have its laws set elsewhere, we have “honoured the referendum result”.

None of which changes my view that leaving the single market would be a catastrophe for the United Kingdom. But retaining Britain’s single market membership starts with making the argument for single market membership, not hiding behind rhetorical tricks about whether or not single market membership was on the ballot last June, when it quite clearly was. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.