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.

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An unmatched font of knowledge

Edinburgh’s global reputation as a knowledge economy is rooted in the performance and international outlook of its four universities.

As sociologist-turned US Senator Daniel Patrick Moynihan recognised when asked how to create a world-class city, a strong academic offering is pivotal to any forward-looking, ambitious city. “Build a university,” he said, “and wait 200 years.” He recognised the long-term return such an investment can deliver; how a renowned academic institution can help attract the world. However, in today’s increasingly globalised higher education sector, world-class universities no longer rely on the world coming to come to them – their outlook is increasingly international.

Boasting four world-class universities, Edinburgh not only attracts and retains students from around the world, but also increasingly exports its own distinctively Scottish brand of academic excellence. In fact, 53.9% of the city’s working age population is educated to degree level.

In the most recent QS World University Rankings, the University of Edinburgh was named as the 21st best university in the world, reflecting its reputation for research and teaching. It’s a fact reflected in the latest UK Research Exercise Framework (REF), conducted in 2014, which judged 96% of its academic departments to be producing world-leading research.

Innovation engine

Measured across the UK, annual Gross Value Added (GVA) by University of Edinburgh start-ups contributes more than £164m to the UK economy. In fact, of 262 companies to emerge from the university since the 1960s, 81% remain active today, employing more than 2,700 staff globally. That performance places the University of Edinburgh ahead of institutions such as MIT in terms of the number of start-ups it generates; an innovation hothouse that underlines why one in four graduates remain in Edinburgh and why blue chip brands such as Amazon, IBM and Microsoft all have R&D facilities in the city.

One such spin out making its mark is PureLiFi, founded by Professor Harald Haas to commercialise his groundbreaking research on data transmission using the visible light spectrum. With data transfer speeds 10,000 times faster than radio waves, LiFi not only enables bandwidths of 1 Gigabit/sec but is also far more secure.

Edinburgh’s universities play a pivotal role in the local economy. Through its core operations, knowledge transfer activities and world-class research the University generated £4.9bn in GVA and 44,500 jobs globally, when accounting for international alumni.

With £1.4bn earmarked for estate development over the next 10 years, the University of Edinburgh remains the city’s largest property developer. Its extensive programme of investment includes the soon-to-open Higgs Centre for Innovation. A partnership with the UK Astronomy Technology Centre, the new centre will open next year and will supply business incubation support for potential big data and space technology applications, enabling start-ups to realise the commercial potential of applied research in subjects such as particle physics.

It’s a story of innovation that is mirrored across Edinburgh’s academic landscape. Each university has carved its own areas of academic excellence and research expertise, such as the University of Edinburgh’s renowned School of Informatics, ranked among the world’s elite institutions for Computer Science. 

The future of energy

Research conducted into the economic impact of Heriot-Watt University demonstrated that it generates £278m in annual GVA for the Scottish economy and directly supports more than 6,000 jobs.

Set in 380-acres of picturesque parkland, Heriot-Watt University incorporates the Edinburgh Research Park, the first science park of its kind in the UK and now home to more than 40 companies.

Consistently ranked in the top 25% of UK universities, Heriot-Watt University enjoys an increasingly international reputation underpinned by a strong track record in research. 82% of the institution’s research is considered world-class (REF) – a fact reflected in a record breaking year for the university, attracting £40.6m in research funding in 2015. With an expanding campus in Dubai and last year’s opening of a £35m campus in Malaysia, Heriot-Watt is now among the UK’s top five universities in terms of international presence and numbers of international students.

"In 2015, Heriot-Watt University was ranked 34th overall in the QS ‘Top 50 under 50’ world rankings." 

Its established strengths in industry-related research will be further boosted with the imminent opening of the £20m Lyell Centre. It will become the Scottish headquarters of the British Geological Survey, and research will focus on global issues such as energy supply, environmental impact and climate change. As well as providing laboratory facilities, the new centre will feature a 50,000 litre climate change research aquarium, the UK Natural Environment Research Council Centre for Doctoral Training (CDT) in Oil and Gas, and the Shell Centre for Exploration Geoscience.

International appeal

An increasingly global outlook, supported by a bold international strategy, is helping to drive Edinburgh Napier University’s growth. The university now has more than 4,500 students studying its overseas programmes, through partnerships with institutions in Hong Kong, Singapore, China, Sri Lanka and India.

Edinburgh Napier has been present in Hong Kong for more than 20 years and its impact grows year-on-year. Already the UK’s largest higher education provider in the territory, more than 1,500 students graduated in 2015 alone.

In terms of world-leading research, Edinburgh Napier continues to make its mark, with the REF judging 54% of its research to be either world-class or internationally excellent in 2014. The assessment singled out particular strengths in Earth Systems and Environmental Sciences, where it was rated the top UK modern university for research impact. Taking into account research, knowledge exchange, as well as student and staff spending, Edinburgh Napier University generates in excess of £201.9m GVA and supports 2,897 jobs in the city economy.

On the south-east side of Edinburgh, Queen Margaret University is Scotland’s first university to have an on-campus Business Gateway, highlighting the emphasis placed on business creation and innovation.

QMU moved up 49 places overall in the 2014 REF, taking it to 80th place in The Times’ rankings for research excellence in the UK. The Framework scored 58% of Queen Margaret’s research as either world-leading or internationally excellent, especially in relation to Speech and Language Sciences, where the University is ranked 2nd in the UK.

In terms of its international appeal, one in five of Queen Margaret’s students now comes from outside the EU, and it is also expanding its overseas programme offer, which already sees courses delivered in Greece, India, Nepal, Saudi Arabia and Singapore.

With 820 years of collective academic excellence to export to the world, Edinburgh enjoys a truly privileged position in the evolving story of academic globalisation and the commercialisation of world-class research and innovation. If he were still around today, Senator Moynihan would no doubt agree – a world-class city indeed.

For further information www.investinedinburgh.com