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GDP and the Labour Market, Q3 2011

Released: 24 November 2011 Download PDF

GDP growth

2011 Q3

GDP growth

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Employment and GDP growth

GDP growth remained at 0.5 per cent in the second release of the third quarter's estimate.

On the face of it, growth of 0.5 per cent is reasonably solid in view of the turmoil in markets relating to the sovereign debt crisis in the euro area, which impacts on the real economy through confidence, risk aversion and lending/borrowing channels. However, GDP growth was also 0.5 per cent compared to the same quarter in 2010, so growth has averaged just over 0.1 per cent over the last four quarters. GDP growth for the four quarters between the third quarter of 2009 and the third quarter of 2010 was 2.6 per cent, so the annual growth rate for the third quarter 2011 is a marked slowdown from the previous year.

During the recession and much of the recovery, the labour market response to economic activity and growth has tended to be slightly lagged, and employers' response to the weakening economy involved reducing hours worked and holding down pay growth as well as cutting numbers employed. However, in recent months the labour market has begun to reflect more of the impact from the weak growth in the wider economy, with employment falling and unemployment rising in a more sustained way.

In addition, wage growth has been modest, at around 2 per cent for much of the last 12 months. This is less than half the rate of inflation over the last nine months, so households have faced a prolonged period of negative real wage growth.

GDP, employment and total weekly hours worked

2011 Q3

GDP, employment and total weekly hours worked

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The labour market weakened in 2011 Q3

In Q3, employment dropped by 197,000 with the employment rate dropping 0.4 percentage points to 70.2 per cent.

Unemployment increased by 129,000 on the previous quarter and by 172,000 on the same period a year ago. The claimant count rose by 66,200 between June and September but since August the rises in the claimant count have been smaller.

Total weekly hours increased in Q3 to reach 913.7 million hours but are still lower than total weekly hours in 2011 Q1 and are at a level similar to 2010 Q1.

As the latest, labour market data has deteriorated, so the previously divergent paths of output and employment have started to close somewhat. The chart illustrates that the large gap between GDP and employment growth in 2009 narrowed during 2010 and more particularly into 2011 Q3.

Source: Office for National Statistics

Background notes

  1. Sources:
    Gross Domestic Product (ABMI): chained volume measures, seasonally adjusted, Office for National Statistics.

    Total employment level (MGRZ): Labour Force Survey, all those aged 16 and over, seasonally adjusted, Office for National Statistics. Total weekly hours (YBUS): Labour Force Survey, seasonally adjusted, Office for National Statistics.

  2. Notes:
    Most recent Labour Market estimates are available from the Labour Market Statistical Bulletin published on 16 November 2011.

    GDP estimate for quarter three from Gross Domestic Product: Second Estimate – Q3 2011 published on 24 November 2011.

  3. Details of the policy governing the release of new data are available by visiting or from the Media Relations Office email:

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