Real wages down and unemployment stubbornly high, but could that be good news?

Unemployment's fall has stopped, but that could signal a recovery in productivity.

The ONS has released the latest labour market statistics, showing a 0.2 percentage point decline in the unemployment rate to 7.8 per cent in the last three months (2.51 million unemployed people, down by 57,000 people). The employment rate, however, was also down by 0.1 percentage points to 71.4 per cent over the same period (29.71 million employed people, up by 17,000 people).

Other headline stats show long term unemployment increasing by 15,000 to the highest level since 1996, youth unemployment decreasing by 0.2 percentage points to 20.9 per cent, and total pay increasing by 1.7 per cent, leading to a 1 per cent decrease in real wages.

As you can see from the first graph above, the quarter-on-quarter fall in unemployment is largely reversing the rise that was reported this spring. If you look at the month-on-month statistics, designated as "experimental" by the ONS due to their habit of fluctuating fairly wildly, we can see that unemployment was down by slightly over half a percentage point since April.

That's important, because it adds further support to the theory that the long-term improvement in the labour market has been replaced by stagnation. Economics reporters tend to focus on the fact that unemployment is down from a high of 8.4 per cent, even against a background of stagnant GDP. And indeed, for over a year, that decline was nearly constant. But the unemployment rate hit a low in December of last year, and since then it has been fluctuating in the high sevens.

That's bad news for Cameron and Osborne, because falling unemployment was frequently used as a fig leaf to cover the atrocious GDP growth. All the signs indicate that next week's GDP figures will be good, but they may not be good enough.

But it might paradoxically be good news for the country. The disconnect between employment and growth was due to productivity in Britain plummeting. In simple terms, a British worker doing an hour's work simply wasn't producing as much value after the recession as they were before. There's a lot of theories as to why, ranging from low morale and lazy workers to insipid investment and low demand, but regardless of why, they all point to the same conclusion: if GDP is to properly take off, productivity has to recover. The hope is that slowing decline in unemployment could be because the recovery is coming to productivity; and our catch-up growth might finally be around the corner.

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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Corbyn is personally fireproof, but his manifesto could be torched by the Brexit blaze

There is no evidence that EU migration has depressed wages – but most Labour MPs believe it has.

News, like gas, expands to fill the space available to it. That’s why the summer recess can so often be a time of political discomfort for one party or another. Without the daily grind of life at Westminster, difficult moments can linger. Minor rows become front-page news.

There are many reasons why Theresa May is spending three weeks hiking in northern Italy and Switzerland, and one of them is that it is hard to have a leadership crisis if your leader is elsewhere. That makes the summer particularly dangerous for Labour. The danger is heightened as the majority of the press is unsympathetic to the party and the remainder is simply bored. Even a minor crisis could turn into a catastrophe.

Jeremy Corbyn’s interview on BBC1’s The Andrew Marr Show on 23 July, therefore, carried the same risks as juggling lit matches in a dry forest. The Labour leader ruled out continuing participation in the single market after Britain leaves the political structures of the European Union. For good measure, he added that the “wholesale importation” of people from eastern and central Europe had been used to undermine pay and conditions for British workers. Both statements only aggravate the stress fractures in the Labour movement and in its electoral coalition.

The good news for the Labour leader is that he is fireproof. Only God or Corbyn himself can prevent him from leading the party into the next election, whenever it comes, and no one will be foolish enough to try to remove him, even if they had the inclination. Also, while the question of what flavour of Brexit to pursue divides Labour in the country, it doesn’t divide Labour at Westminster. Most Labour MPs nodded along in agreement with Corbyn during the Marr interview. They believe – as the shadow international trade secretary, Barry Gardiner, outlined a day later – that remaining in the customs union and the single market would be a betrayal of the wishes of Leave voters, who want full control over Britain’s borders and laws.

There is no evidence that migration from the eastern bloc has depressed wages. But most Labour MPs believe that it has. “I am convinced,” one formerly pro-European MP told me, “that no matter what the studies say, immigration has reduced wages.”

Most of the Labour people who are willing to kick up a fuss about “hard” Brexit are outside parliament. These include the Welsh First Minister, Carwyn Jones, who wants Britain to remain in the single market; the general secretary of the TSSA union, Manuel Cortes, who recently used the New Statesman website to urge the party to keep all of its options open, including a second referendum to keep Britain in the EU; and the rapper Akala, who lambasted Corbyn’s interview on Twitter. While a large minority of Labour MPs back a softer version of Brexit, they are a minority, and not a large enough one to combine with Tory dissidents to make a Commons majority, even when the votes of the SNP, Plaid Cymru and the Green MP Caroline Lucas are taken into account.

This increases the party’s dependence on Jeremy Corbyn. As the leader’s aides observe, even among the quarter of the country that believes the government should simply overturn the referendum result, only a quarter of that quarter do so because they have a particular affection for the institutions of the European Union.

For the majority of hard Remainers, Brexit is a significant battleground in a larger culture war, one in which Corbyn is otherwise in perfect alignment with their values. His electoral appeal to Labour MPs is that he is someone who can say the same things on Brexit and migration as Yvette Cooper or Stephen Kinnock previously did, but without losing votes in England’s great cities.

The electoral threat to Labour from backing a harder form of exit is, in any case, often overstated. The first-past-the-post system makes the Liberal Democrats an inadequate refuge for anguished Remainers in England, while the SNP’s support for Scottish independence makes it an unsuitable home for Labour refugees in Scotland. Team Corbyn feels that Vince Cable, the Liberal Democrats’ new leader, will struggle to convince Labour voters that he can be trusted because of the role he played in designing the new system of tuition fees (having previously pledged to vote against them). In any case, the risk of letting in a Conservative prime minister – probably one committed to a version of Brexit even harder than Labour’s – further locks Remainers in Labour’s corner.

That leaves Labour in Westminster free to pursue a version of Brexit that meets the needs of both the leadership, which relishes the freedom to pursue a more radical economic policy unconstrained by the European Union, and Labour MPs, particularly those with seats in Yorkshire and the Midlands, who are concerned about opposition to immigration in their constituencies. This has the happy side effect of forcing the Conservatives to take the blame for delivering any Brexit deal that falls short of the promises made by Vote Leave during the referendum and in the high-blown rhetoric used by Theresa May during the election campaign.

However, all is not rosy. What most Labour MPs seem to have forgotten is that Brexit is not simply a political battleground – something to be leveraged to reduce the number of complaints about migration and to hasten the Tory government into an early grave. There is a political victory to be had by using the Brexit process to clobber the government. But there is also a far bigger defeat in store for the left if leaving the EU makes Britain poorer and more vulnerable to the caprice of international finance. That Jeremy Corbyn is personally fireproof doesn’t mean that his manifesto can’t be torched by the Brexit blaze. 

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.

This article first appeared in the 27 July 2017 issue of the New Statesman, Summer double issue