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 Images
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The buck doesn't stop with Grant Shapps - and probably shouldn't stop with Lord Feldman, either

The question of "who knew what, and when?" shouldn't stop with the Conservative peer.

If Grant Shapps’ enforced resignation as a minister was intended to draw a line under the Mark Clarke affair, it has had the reverse effect. Attention is now shifting to Lord Feldman, who was joint chair during Shapps’  tenure at the top of CCHQ.  It is not just the allegations of sexual harrassment, bullying, and extortion against Mark Clarke, but the question of who knew what, and when.

Although Shapps’ resignation letter says that “the buck” stops with him, his allies are privately furious at his de facto sacking, and they are pointing the finger at Feldman. They point out that not only was Feldman the senior partner on paper, but when the rewards for the unexpected election victory were handed out, it was Feldman who was held up as the key man, while Shapps was given what they see as a relatively lowly position in the Department for International Development.  Yet Feldman is still in post while Shapps was effectively forced out by David Cameron. Once again, says one, “the PM’s mates are protected, the rest of us shafted”.

As Simon Walters reports in this morning’s Mail on Sunday, the focus is turning onto Feldman, while Paul Goodman, the editor of the influential grassroots website ConservativeHome has piled further pressure on the peer by calling for him to go.

But even Feldman’s resignation is unlikely to be the end of the matter. Although the scope of the allegations against Clarke were unknown to many, questions about his behaviour were widespread, and fears about the conduct of elections in the party’s youth wing are also longstanding. Shortly after the 2010 election, Conservative student activists told me they’d cheered when Sadiq Khan defeated Clarke in Tooting, while a group of Conservative staffers were said to be part of the “Six per cent club” – they wanted a swing big enough for a Tory majority, but too small for Clarke to win his seat. The viciousness of Conservative Future’s internal elections is sufficiently well-known, meanwhile, to be a repeated refrain among defenders of the notoriously opaque democratic process in Labour Students, with supporters of a one member one vote system asked if they would risk elections as vicious as those in their Tory equivalent.

Just as it seems unlikely that Feldman remained ignorant of allegations against Clarke if Shapps knew, it feels untenable to argue that Clarke’s defeat could be cheered by both student Conservatives and Tory staffers and the unpleasantness of the party’s internal election sufficiently well-known by its opponents, without coming across the desk of Conservative politicians above even the chair of CCHQ’s paygrade.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.