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GDP and the Labour Market, Q1 2012 - May GDP Update

Released: 24 May 2012 Download PDF

GDP and earnings growth

2012 Q1

GDP and earnings growth

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Output and earnings growth are both weak

The fall in GDP of 0.3 per cent in 2012 Q1, coupled with the negative growth in the fourth quarter of 2011, means that total output has declined by 0.6 per cent over the last two quarters.  The economy has been broadly flat over the past year.   Since 2010 Q3, when the economy had grown for five consecutive quarters following the 2008-09 recession, real GDP has contracted by a total of 0.4 per cent.

The fall in GDP in the latest quarter is mainly due to weakness in construction output. Overall services grew by 0.1 per cent while production fell by 0.4 per cent.

Reflecting the subdued economic picture, average earnings growth (total pay) has also been weak.  In the services sector, annual earnings rose by only 0.6 per cent in the three months to March, compared with estimated output growth of 1.0 per cent over the same period.  For construction, annual earnings fell 0.4 per cent compared with a fall in output of 3.7 per cent (from the construction release), while manufacturing earnings increased by 0.5 per cent against a 0.8 per cent drop in output.

Since the start of the 2008 recession, employment has responded more slowly to changes in GDP growth than might be expected on the basis of experience from previous economic downturns.  There are many possible reasons for this, such as greater flexibility in the response of hours worked, the degree of part-time working, and earnings growth.  There has been a substantial move towards more part time or temporary workers, for which we have seen quite marked increases over the last four years. Further, the relatively weak wage growth over the last four years may reflect another way in which the labour market has adjusted to the weak economic conditions.

GDP and employment

2012 Q1

GDP and employment

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Steady full-time employment in recent quarters mirrors flat GDP growth

The latest set of labour market statistics show an increase in employment of 0.4 per cent between the final quarter of 2011 and the first quarter of 2012. The increase in employment was entirely driven by additional part time workers, with full time employment falling very slightly. Total weekly hours worked increased by 0.9 per cent in the latest quarter, as the rising employment level was accompanied by a 0.5 per cent increase in average weekly hours worked. In particular, there was an increase in the average hours worked by part-time workers of 1.3 per cent.

The labour market therefore remains broadly steady, with full-time employment showing a small decline over the past year. Similarly real GDP growth has been subdued, falling by 0.3 per cent in the latest quarter, and its level was 0.1 per cent lower compared with the first quarter of 2011.

Figures for weak earnings growth, increasing part time employment and a fall in vacancies portray a more subdued picture of the labour market than might be obtained from looking exclusively at the behaviour of total employment and hours.

Source: Office for National Statistics

Background notes

  1. Sources

    Gross Domestic Product (ABMI): chained volume measures, seasonally adjusted, Office for National Statistics. Gross Domestic Product quarter on quarter previous year growth (IHYR): chained volume measures, seasonally adjusted, Office for National Statistics.

    Total people working full time (YCBE): Labour Force Survey, all those aged 16 and over, seasonally adjusted, Office for National Statistics. Total people working part time (YCBH): Labour Force Survey, all those aged 16 and over, seasonally adjusted, Office for National Statistics. Temporary employees(YCBZ): Labour Force Survey, all those aged 16 and over, seasonally adjusted, Office for National Statistics. Average weekly earnings total pay growth (KAC3):  Monthly Wages and Salaries Survey, seasonally adjusted, Office for National Statistics.

  2. Notes

    GDP estimate for quarter one from Gross Domestic Product: Second Estimate – Q1 2012 published on 24 May 2012.

    Most recent Labour Market estimates are available from the Labour Market Statistical Bulletin published on 16 May 2012. 

  3. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

Content from the Office for National Statistics.
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