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
Show Hide image

Why are boundary changes bad for Labour?

New boundaries, a smaller House of Commons and the shift to individual electoral registration all tilt the electoral battlefield further towards the Conservatives. Why?

The government has confirmed it will push ahead with plans to reduce the House of Commons to 600 seats from 650.  Why is that such bad news for the Labour Party? 

The damage is twofold. The switch to individual electoral registration will hurt Labour more than its rivals. . Constituency boundaries in Britain are drawn on registered electors, not by population - the average seat has around 70,000 voters but a population of 90,000, although there are significant variations within that. On the whole, at present, Labour MPs tend to have seats with fewer voters than their Conservative counterparts. These changes were halted by the Liberal Democrats in the coalition years but are now back on course.

The new, 600-member constituencies will all but eliminate those variations on mainland Britain, although the Isle of Wight, and the Scottish island constituencies will remain special cases. The net effect will be to reduce the number of Labour seats - and to make the remaining seats more marginal. (Of the 50 seats that would have been eradicated had the 2013 review taken place, 35 were held by Labour, including deputy leader Tom Watson's seat of West Bromwich East.)

Why will Labour seats become more marginal? For the most part, as seats expand, they will take on increasing numbers of suburban and rural voters, who tend to vote Conservative. The city of Leicester is a good example: currently the city sends three Labour MPs to Westminster, each with large majorities. Under boundary changes, all three could become more marginal as they take on more wards from the surrounding county. Liz Kendall's Leicester West seat is likely to have a particularly large influx of Tory voters, turning the seat - a Labour stronghold since 1945 - into a marginal. 

The pattern is fairly consistent throughout the United Kingdom - Labour safe seats either vanishing or becoming marginal or even Tory seats. On Merseyside, three seats - Frank Field's Birkenhead, a Labour seat since 1950, and two marginal Labour held seats, Wirral South and Wirral West - will become two: a safe Labour seat, and a safe Conservative seat on the Wirral. Lillian Greenwood, the Shadow Transport Secretary, would see her Nottingham seat take more of the Nottinghamshire countryside, becoming a Conservative-held marginal. 

The traffic - at least in the 2013 review - was not entirely one-way. Jane Ellison, the Tory MP for Battersea, would find herself fighting a seat with a notional Labour majority of just under 3,000, as opposed to her current majority of close to 8,000. 

But the net effect of the boundary review and the shrinking of the size of the House of Commons would be to the advantage of the Conservatives. If the 2015 election had been held using the 2013 boundaries, the Tories would have a majority of 22 – and Labour would have just 216 seats against 232 now.

It may be, however, that Labour dodges a bullet – because while the boundary changes would have given the Conservatives a bigger majority, they would have significantly fewer MPs – down to 311 from 330, a loss of 19 members of Parliament. Although the whips are attempting to steady the nerves of backbenchers about the potential loss of their seats, that the number of Conservative MPs who face involuntary retirement due to boundary changes is bigger than the party’s parliamentary majority may force a U-Turn.

That said, Labour’s relatively weak electoral showing may calm jittery Tory MPs. Two months into Ed Miliband’s leadership, Labour averaged 39 per cent in the polls. They got 31 per cent of the vote in 2015. Two months into Tony Blair’s leadership, Labour were on 53 per cent of the vote. They got 43 per cent of the vote. A month and a half into Jeremy Corbyn’s leadership, Labour is on 31 per cent of the vote.  A Blair-style drop of ten points would see the Tories net 388 seats under the new boundaries, with Labour on 131. A smaller Miliband-style drop would give the Conservatives 364, and leave Labour with 153 MPs.  

On Labour’s current trajectory, Tory MPs who lose out due to boundary changes may feel comfortable in their chances of picking up a seat elsewhere. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.