GDP and the Labour Market - 2011 Q4 - January GDP update
GDP contracted by 0.2 per cent in the fourth quarter of 2011, driven by weakness in the production sector.
Growth in the construction sector was slightly negative and was flat in the service sector, so these two sectors made no contribution to GDP growth in the fourth quarter. Comparing GDP to the same quarter in 2010, output expanded by 0.8 percentage points. And in 2011 as a whole, GDP grew by 0.9 per cent compared to 2.1 per cent during 2010. So the economy has showed subdued growth during 2011.
Despite the contraction in output in the fourth quarter, employment rose by 26,000 in the three months to November, compared to a year ago. However, this is a relatively modest increase in employment, and with the economically active population continuing to rise, the unemployment level and rate has risen quite sharply in the three months to November.
After remaining steady in the 7.7-8.0 per cent range throughout the two years between mid-2009 to mid-2011, the unemployment rate has since moved up to 8.4 per cent in the three months to November. This resulted from an increase of 118,000 in the number of unemployed people between the two latest three month periods to a level of 2.68 million.
As a result of the weakness in employment, which during much of 2011 was weaker than the level of economic activity, productivity in the whole economy has started to recover some of the ground lost during the recession. Measured in terms of output per worker, whole economy productivity has risen in the third quarter of 2011, to reach a level 0.9 per cent higher than a year earlier, while output per hour was 1.3 per cent higher.
Whole economy output per worker fell by nearly 6 per cent between the end of 2004 and the start of 2009. The subsequent recovery in productivity, as employment reacts with a lag to the fall in output during the recession, has been modest. However output per worker is now only 2.4 per cent below its pre-recession peak, and output per hour is just over 1 per cent lower.
In the manufacturing sector, continuing falls in employment and hours mean that productivity on an output per hour basis has risen by 4.7 per cent over the past year and is now at record levels. Productivity in the government services sector has also been rising strongly in reflection of the sharp reduction in the number of public sector jobs.
Average weekly earnings (AWE) growth has been slowing in recent months and now stands at 1.9 per cent in the three months to November for the whole economy, down from 2.8 per cent growth in the three months to July. This marked drop in earnings growth may reflect a number of pressures in the labour market: the desire by firms to reduce their costs in the face of weak demand; weak wage bargaining power of employees as a result of high unemployment and low employment levels; falling inflation which will ease the decline in real wage growth and so reduce the pressure on employers to maintain wage growth; and falling demand and output.
Source: Office for National Statistics
Background notes
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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.
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Notes:
GDP estimate for quarter four from Gross Domestic Product: Preliminary Estimate – Q4 2011 published on 25 January 2012.
Most recent Labour Market estimates are available from the Labour Market Statistical Bulletin published on 18 January 2012.
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