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Statistical bulletin: Labour Productivity - Q3 2011 This product is designated as National Statistics

Released: 23 December 2011 Download PDF

Key Points

  • Correction: the market sector productivity series published on 23 December 2011 were affected by an error in market sector gross value added. Further details are in the 'Correction 21 March 2012' section below.
  • UK labour productivity increased by 0.2 per cent in the third quarter of 2011 on an output per hour basis, while market sector productivity fell by 0.1 per cent.
  • Productivity of the production industries rose by 1.2 per cent, within which manufacturing productivity rose by 1.4 per cent to a record level.
  • Productivity of the service sector increased by 0.3 per cent in the third quarter.
  • UK unit labour costs increased by 0.5 per cent. Within the manufacturing sector, unit wage costs fell by 0.4 per cent.

About this release

This quarterly bulletin contains labour productivity statistics for the third quarter of 2011 in terms of output per worker, per job and per hour for the whole economy and a range of industries.  Labour productivity measures the amount of real (inflation adjusted) economic output that is produced by a unit of labour input, and is a key measure of economic performance.  Output statistics are consistent with Quarterly National Accounts published on 22 December 2011. Labour input measures are consistent with Labour Market Statistics, published on 14 December 2011. More information on sources used in this bulletin is available in the note on sources section.

This release also contains annual regional productivity estimates for 2010, expressed in current prices, consistent with regional gross value added (GVA) statistics published on 14 December 2011.

 

Correction 21 March 2012

An error was discovered in all market sector productivity series (identifiers GYY4, GYY5, GYY6, GYY7, GYY8, GYY9) in the Labour Productivity Q3 2011 bulletin, as published on 23 December 2011.

The series were affected by a production error in the market sector gross value added series (identifier L48H) as published in table A1 of the Quarterly National Accounts release for Quarter 3 2011, originally published on 22 December 2011.

A corrected version of Labour Productivity Table 7 containing the correct market sector productivity results (282 Kb Excel sheet) is now included as an excel spreadsheet in the Labour Productivity Statistics Data Tables. All other references to the market sector series within this bulletin, including the pdf version of Table 7, are incorrect. The next edition of the bulletin, due to be published on 29 March 2012, will contain corrected market sector productivity series throughout.

ONS apologises for any inconvenience caused.

Interpreting these statistics

At the whole economy level, output (gross value added) grew by 0.5 per cent in the third quarter, while the Labour Force Survey (LFS) shows that the number of workers and jobs (which are closely correlated) fell by 0.7 and 0.6 per cent respectively, and the number of hours worked increased by 0.3 per cent.  Arithmetically, therefore, UK output per worker and output per job increased sharply (by 1.2 per cent in each case), while UK output per hour showed a more moderate increase of 0.2 per cent (Table 1).

The increase in hours combined with the reduction in workers and jobs implies a rise in average hours worked per week.  Across the whole economy this equates to an increase of 18 minutes for the average worker.

Two factors to bear in mind when interpreting these statistics are:

  • Separate data on jobs from business surveys, known as workforce jobs, show an increase in jobs over the third quarter.  Productivity estimates in this bulletin use data from business surveys on the distribution of jobs across the economy, but benchmark the overall number of jobs to the LFS estimate.  For further information see the note on sources section of this bulletin. 

  • Although data in this bulletin are seasonally adjusted, the extra bank holiday in the second quarter for the Royal Wedding is likely to have affected average hours more than the number of jobs.  Thus some of the increase in average hours in the third quarter probably reflects the reversal of this effect, and a more reliable indicator of trends in productivity may be obtained by averaging growth over the last two quarters.

Whole economy labour productivity

See Table 1 (282 Kb Excel sheet)

Whole economy output per worker

United Kingdom

Whole economy output per worker, per cent change on previous quarter and change on quarter a year ago
Source: Office for National Statistics

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Whole economy output per hour

United Kingdom

Whole economy output per hour, per cent change on previous quarter and change on quarter a year ago
Source: Office for National Statistics

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Whole economy labour productivity components (seasonally adjusted)

Output Productivity Jobs Productivity Hours
Change on Change on Change on Change on Change on Change on
quarter a  previous quarter a  previous quarter a  previous
Per cent year ago quarter   year ago quarter   year ago quarter
2009 Q1 -6.6 -1.7 -0.9 -0.4 -3.1 -1.5
Q2 -6 -0.4 -2.1 -1 -2.4 -0.3
Q3 -4.1 0.2 -1.6 -0.1 -3 -0.7
Q4 -1.2 0.7 -1.4 0 -2.3 0.3
2010 Q1 0.9 0.4 -1.4 -0.4 -1.2 -0.4
Q2 2.5 1.1 0.4 0.9 0.4 1.3
Q3 3 0.7 1 0.5 1.6 0.4
Q4 1.9 -0.4 0.7 -0.2 1.3 0
2011 Q1 1.9 0.4 1.7 0.6 1.8 0.1
Q2 0.7 0 0.8 -0.1 -0.7 -1.2
Q3 0.5 0.5 -0.4 -0.6 -0.8 0.3

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Unit labour costs

See Table 2 (282 Kb Excel sheet)

Unit labour costs reflect the full labour costs, including social security and pension contributions paid by employers, incurred in the production of a unit of output, while unit wage costs are a narrower measure, excluding non-wage labour costs.

Although not a direct measure of productivity, an inverse relationship between unit labour costs and productivity tends to be observed, as wage growth is less cyclical than labour productivity.  Over the cycle, unit labour and wage costs provide an indication of inflationary pressures in the economy.

In the third quarter of 2011, whole economy unit labour costs were 0.5 per cent higher than the previous quarter, and 1.6 per cent higher than the third quarter of 2010.

Whole economy unit labour costs

United Kingdom

Whole economy unit labour costs, per cent change on previous quarter and change on quarter a year ago

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Manufacturing unit wage costs in the third quarter of 2011 fell by 0.4 per cent compared with the previous quarter, and by 1.7 per cent compared with the same quarter a year ago.  This reflects a strong increase in productivity combined with continuing modest growth in manufacturing earnings.

Manufacturing unit wage costs

United Kingdom

Manufacturing unit wage costs, per cent change on previous quarter and change on quarter a year ago
Source: Office for National Statistics

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Manufacturing labour productivity

See Tables 1, 3 and 4 (282 Kb Excel sheet)

Manufacturing output per job

United Kingdom

Manufacturing output per job, per cent change on previous quarter and change on quarter a year ago
Source: Office for National Statistics

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Manufacturing output per hour

United Kingdom

Manufacturing output per hour, per cent change on previous quarter and change on quarter a year ago
Source: Office for National Statistics

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Both productivity measures for manufacturing are at their highest recorded level this quarter.  Since the end of the recession the manufacturing sector continues to show much higher growth than the services sector and the economy as a whole.  Over the last year productivity growth has been especially strong in subsection CK (Machinery and equipment) and CL (Transport equipment).

Manufacturing labour productivity components (seasonally adjusted)

Output Productivity Jobs Productivity Hours
Change on Change on Change on Change on Change on Change on
quarter a  previous quarter a  previous quarter a  previous
Per cent year ago quarter   year ago quarter   year ago quarter
2009 Q1 -12.5 -4.4 -6.7 -2.8 -10.5 -5.5
Q2 -11.0 -0.3 -8.2 -2.1 -8.7 -0.1
Q3 -10.2 -0.8 -6.8 -0.1 -8.3 -1.3
Q4 -4.4 1.1 -5.1 -0.2 -6.1 0.8
2010 Q1 1.2 1.2 -4.6 -2.3 -2.1 -1.4
Q2 3.2 1.6 -2.7 -0.1 -1.3 0.7
Q3 5.5 1.4 -2.5 0.1 0.1 0.0
Q4 5.0 0.6 -2.2 0.1 0.1 0.8
2011 Q1 4.5 0.7 -0.1 -0.2 2.6 1.0
Q2 2.9 0.1 -0.7 -0.7 -1.7 -3.5
Q3 1.5 0.0 -1.7 -0.9 -3.1 -1.4

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Services labour productivity

See Table 1, 5 and 6 (282 Kb Excel sheet)

Services output per job

United Kingdom

Services output per job, per cent change on previous quarter and change on quarter a year ago
Source: Office for National Statistics

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Services output per hour worked

United Kingdom

Services output per hour worked, per cent change on previous quarter and change on quarter a year ago
Source: Office for National Statistics

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Within services, output per job in financial and insurance activities (section K) has contracted almost continuously since its peak in 2007 Q3, predominately reflecting a contraction in output.  However, output per job growth in section K was 3.0 per cent in the third quarter of 2011, the fastest across the service sector.

Finance and insurance also experienced the fastest growth in output per hour in the third quarter, at 1.7 per cent.  Productivity growth on this measure was lowest in administrative and support service activities, at -2.8 per cent.  Output per hour in wholesale and retail trade, the service industry with the largest weight (expressed as a share of GVA), grew by 1.1 per cent in Q3 compared to the previous quarter.

Services labour productivity components (seasonally adjusted)

Output Productivity Jobs Productivity Hours
Change on Change on Change on Change on Change on Change on
quarter a  previous quarter a  previous quarter a  previous
Per cent year ago quarter   year ago quarter   year ago quarter
2009 Q1 -4.7 -0.8 -0.4 -0.1 -2.4 -1.0
Q2 -4.0 -0.2 -1.4 -0.8 -1.4 -0.1
Q3 -2.0 0.4 -0.7 0.2 -2.1 -0.6
Q4 0.2 0.8 -0.6 0.1 -1.3 0.4
2010 Q1 1.0 0.0 -0.7 -0.2 -0.7 -0.4
Q2 1.8 0.5 0.8 0.7 0.4 1.0
Q3 2.0 0.6 1.1 0.5 1.6 0.5
Q4 0.8 -0.3 0.8 -0.2 0.9 -0.2
2011 Q1 1.6 0.8 1.8 0.8 1.6 0.3
Q2 1.2 0.1 1.1 0.0 -0.4 -0.9
Q3 1.3 0.7 0.0 -0.7 -0.5 0.4

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Market sector labour productivity - experimental

See Table 7 (282 Kb Excel sheet)

Market sector output per worker grew by 0.6 per cent in Q3 compared to Q2, reflecting output growth of 0.3 per cent and a fall of 0.3 per cent in market sector workers.  On an output per hour basis, market sector productivity fell by -0.1 per cent.

Slower growth of productivity in the market sector than in the UK economy as a whole implies that productivity in the non-market sector has grown relatively fast.  This is consistent with output per job and output per hour estimates for government services (sections O-Q), which grew by 2.7 per cent and 1.6 per cent respectively in the third quarter, mainly reflecting falls in labour input.

Market sector and whole economy output per worker

United Kingdom

Market sector comparison, per cent change on quarter a year ago, market sector and whole economy
Source: Office for National Statistics

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Regional labour productivity

See Table 9 (282 Kb Excel sheet)

ONS does not currently produce regional statistics of real (inflation adjusted) economic output. Rather, this section uses annual regional estimates of nominal GVA (NGVA), and presents the regional data as indices relative to the UK=100.  These statistics indicate the relative value of economic output per job and per hour across the NUTS1 regions.  However, they do not take account of price differences across regions (e.g. housing costs) and should not therefore be interpreted as measures of relative living standards.

Regional NGVA data have been updated to 2010 and the historical estimates have been revised. In 2010, NGVA per job shows London, the South East and (fractionally) Scotland above the UK average, with Wales and Northern Ireland at the bottom of the distribution.

A broadly similar pattern holds for NGVA per hour, except that Scotland falls below the UK average on this measure, and Wales and Northern Ireland swap places in the regional ranking.

Regional nominal GVA per job, 2010

United Kingdom: NUTS 1 regions

Regional nominal GVA per job
Source: Office for National Statistics

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Regional nominal GVA per hour, 2010

United Kingdom: NUTS 1 regions

Regional nominal GVA per hour, 2010
Source: Office for National Statistics

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Revisions

See Table R1

Reference table R1 shows the overall revisions to growth rates of the main productivity variables for the whole economy, manufacturing and services.

Revisions are consistent with revisions published in the Quarterly National Accounts Statistical Bulletin on 22 December 2011, Labour Market Statistics published on 14 December  2011 and Regional, sub –regional and local Gross Value Added 2010 published on 14 December 2011.

In the market sector series, there have been revisions to the back data for public sector employment which results in changes to the market sector workers series prior to 1999.

The table below compares first published estimates for each of the statistics in the first column with the equivalent figures for the same statistics published three years later.  It starts with the first estimates published for 2003 Q4 and compares these with the estimates for the same quarter published three years later.  The difference between these two figures is calculated, and this process is repeated for five years of data i.e. for all quarters to 2008 Q3.  The averages of these differences with and without regard to sign are shown in the right hand side of the table.  These show slightly larger revisions to unit labour costs than to the productivity estimates.

Revisions analysis

Whole economy: Value in latest period (per cent) Revisions between first publication and estimates three years later
Average over 5 years (bias) Average over 5 years without regard to sign (average absolute revision)
Output per worker. Change on quarter a year ago 0.9 -0.18 0.44
Output per job. Change on quarter a year ago 0.9 -0.11 0.44
Output per hour. Change on quarter a year ago 1.3 0.00 0.45
Unit labour costs. Change on quarter a year ago 1.6 0.21 1.03
Unit wage costs. Change on quarter a year ago 1.5 0.07 0.85

Table source: Office for National Statistics

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Note on sources

The measure of output used in these statistics is the chain volume measure of Gross Value Added (GVA) at basic prices, with the exception of the regional analysis where the output measure is nominal GVA (NGVA).  These measures differ because NGVA is not adjusted to account for price changes; this means that if prices were to rise more quickly in one region than the others, then it would be reflected in improved measured productivity performance in that region relative to the others.

Labour input measures used in this bulletin are known as “productivity jobs” and “productivity hours”. Productivity jobs differ from the workforce jobs (WFJ) estimates published in Table 6 of the  Labour Market Statistics Bulletin, in three ways:

  • To achieve consistency with the measurement of GVA, the employee component of productivity jobs is derived on a reporting unit (RU) basis, whereas the employee component of the WFJ estimates is on a local unit (LU) basis.  This is explained further below.

  • Productivity jobs are scaled so industries sum to unadjusted total LFS jobs.

  • Productivity jobs are calendar quarter average estimates whereas WFJ estimates are provided for the last month of each quarter.

Further detail on the definition of productivity jobs can be found in UK Official Productivity Estimates: Review of Methodology (283.5 Kb Pdf) .

Productivity hours are derived by multiplying productivity jobs at an industry level by average actual hours worked from the LFS at an industry level.  Results are scaled so industries sum to total unadjusted LFS hours, and then seasonally adjusted.  Industry estimates of average hours derived in this process differ from published estimates (found in Table HOUR03 in Labour Market Statistics (163 Kb Excel sheet) ) as the LFS allocates all hours worked to the industry of main employment, whereas the productivity hours system disaggregates LFS hours into both industry of main employment and secondary employment.

Whole economy unit labour costs indices are calculated as the ratio of total labour costs to GVA. Further detail on the methodology can be found in Revised methodology for unit wage costs and unit labour costs: explanation and impact.

Manufacturing unit wage costs indices are calculated as the ratio of manufacturing average weekly earnings (AWE) to manufacturing output per filled job.  ONS does not currently produce unit wage costs figures for the services sector.

What is a reporting unit?

The term 'enterprise' is used by ONS to describe the structure of a company. Individual workplaces are known as 'local units' and a group of local units under common ownership is called the 'enterprise'.  Reporting units are the parts of enterprises that return data to ONS. While the majority of reporting units and enterprises are the same, larger enterprises have been split into reporting units to make the reporting easier.

For most business surveys run by ONS, forms are sent to the reporting unit rather than local units, in other words, to the head office rather than individual workplaces. This enables ONS to gather information on a greater proportion of total business activity than would be possible by sending forms to a selection of local units. But it has the disadvantage that it is difficult to make regional estimates - for instance all the employment of, say, a chain of shops would be reported as being concentrated at the site of the head office.

Further differences between reporting unit and local unit data can be seen in the industry coding. Take, for example, a reporting unit with three cake shops and one bakery, each employing five people.  The local unit analysis would put 15 employees in the retail sector and five employees in the manufacturing sector.  But the reporting unit series puts all 20 people into the sector with the majority activity, in this case, retailing.  Detailed industry figures compiled using the local unit approach will therefore be different from industry figures using the reporting unit approach, although the totals will be the same at the whole economy level.

Background notes

  1. This Statistical Bulletin

    This Statistical Bulletin presents Labour Productivity estimates for the United Kingdom. More detail can be found on the Productivity Measures Topic page on the ONS website.

    Index numbers are referenced to 2008=100, are classified to the 2007 revision to the Standard Industrial Classification (SIC) and are seasonally adjusted.

    Quarter on previous quarter changes in output per job and output per hour worked for some of the manufacturing sub-sections and services sections should be interpreted with caution as the small sample sizes used can cause volatility.

  2. Productivity User Group

    ONS will be holding a user group in February 2012.  The aim of the meeting is to gauge how and where these statistics are used and obtain feedback.  To express interest and for more information please email: productivity@ons.gsi.gov.uk

  3. Experimental Series

    Market sector productivity estimates presented in this bulletin are experimental.  Details on the methodology can be found in Market sector GVA productivity measures (241.1 Kb Pdf) .  Please note, in order to be consistent with whole economy productivity measures, four key methodological changes have been made to the market sector output per hour worked series since the publication of that article.  For more information please refer to the Market sector output per hour worked: revisions (60.5 Kb Pdf) briefing note.

    Labour productivity estimates for the following services industries are published on an experimental basis:

    K - Finance and insurance

    L - Real estate activities

    M - Professional, scientific & technical activities

    N - Admin & support

    O-Q - Government services

    R - Arts, entertainment & recreation

    S - Other service activities

  4. Summary Quality Report

    A Summary Quality Report for Labour Productivity (649 Kb Pdf) describes the intended uses of the statistics presented in this publication, their quality and methods used to produce them.

  5. Revisions

    This bulletin contains an analysis of past revisions to productivity growth estimates.  ONS will progressively introduce similar analyses into all of its key economic statistics releases.  Details can be found in Revisions information in ONS First Releases (244.6 Kb Pdf) .

  6. New ONS Website

    The launch of the new ONS web site on 27 August 2011 has brought changes to the design and format of statistical bulletins.  The bulletin main body is available in html and pdf format with the detailed data tables available as Excel spreadsheets, and in the downloadable pdf, to help make it easier for users to obtain the data.  Time Series datasets continue to be made available in their current format. The new website improves the way users can access our statistics but many existing bookmarks and links no longer work and users need to update them.

    You can follow ONS on Twitter and Facebook and watch our videos at YouTube

  7. Publication Policy

    Details of the policy governing the release of new data are available from the Media Relations Office.

    National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics.  They undergo regular quality assurance reviews to ensure that they meet customer needs.  They are produced free from political interference. 

    You may use or re-use this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit the National Archives website or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gsi.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

    © Crown copyright 2011.

  8. 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

Statistical contacts

Name Phone Department Email
Mark Franklin +44 (0)1633 455981 Office of the Chief Economic Adviser productivity@ons.gsi.gov.uk
Get all the tables for this publication in the data section of this publication .
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