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Statistical bulletin: Labour Productivity, Q4 2011 This product is designated as National Statistics

Released: 29 March 2012 Download PDF

Key Points

  • UK labour productivity fell by 0.7 per cent in the fourth quarter of 2011 on an output per hour basis. Market sector productivity fell by 1.0 per cent on this basis.
  • Productivity of the service sector fell by 1.0 per cent in the fourth quarter.
  • Manufacturing productivity rose by 0.7 per cent to a record level in the fourth quarter. Productivity in the broader production sector fell by 0.3 per cent.
  • UK unit labour costs increased by 1.2 per cent in Q4. Manufacturing unit wage costs fell by 0.2 per cent over this period.

About this release

This quarterly bulletin contains labour productivity statistics for the fourth quarter of 2011 for the whole economy and a range of industries, together with selected data on unit labour costs and regional productivity indicators. Labour productivity measures the amount of real (inflation adjusted) economic output that is produced by a unit of labour input (in terms of workers, jobs and hours worked) and is a key indicator of economic performance. Output statistics in this release are consistent with Quarterly National Accounts published on 28 March 2012. Labour input measures are consistent with Labour Market Statistics published on 14 March 2012. More information on sources used in this release is available in the note on sources section below.

Correction 30 March 2012

An error occurred in the index calculation formula for identifiers (DJW6, DJW7, DJW8, DJ4M, DJ4N, DJ4O) contributing to Reference Tables 1 and 10, as published at 9.30 a.m. on 29 March 2012. The data affected are the indices and growth rates of output per job and productivity jobs within the Production section for quarters 3 and 4 of 2011.

The correct index values for output per job (DJ4M) are 100.1 in quarter 3 and 99.5 in quarter 4 2011. The correct index values for productivity jobs (DJW6) are 91.5 in quarter 3 and 90.9 in quarter 4 2011. The growth rates associated with these series have also been revised.

Interpreting these statistics

At the whole economy level output (gross value added – GVA) fell by 0.3 per cent in the fourth quarter of 2011, while the Labour Force Survey (LFS) shows that the number of workers and jobs (which are closely correlated) rose by 0.2 per cent and 0.1 per cent respectively, and the number of hours worked increased by 0.4 per cent.  Arithmetically, therefore, UK output per worker and output per job fell over this period (by 0.5 per cent and 0.4 per cent respectively), while UK output per hour fell by 0.7 per cent (Table 1).

One factor to bear in mind when interpreting these statistics is that separate ONS data on workforce jobs, based largely on business surveys, show a significantly stronger increase in jobs over Q4 than the LFS.  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 in the economy to the LFS estimate.  For more information on the differences between LFS and workforce jobs see Phillips (2012).

There have been significant revisions to workforce jobs (349.7 Kb Pdf) data since the last publication of this statistical bulletin on 23 December 2011.  These revisions lead to changes in productivity at industry level, but since there are no revisions to LFS data, the whole economy estimates are broadly unchanged.

Unit labour costs reflect the full labour costs, including social security and employers’ pension contributions, incurred in the production of a unit of economic output, while unit wage costs are a narrower measure, excluding non-wage labour costs.  Although not a direct measure of labour productivity, an inverse relationship between these unit costs and productivity tends to be observed, as wage growth is less cyclical than productivity.  Over the cycle, unit labour and unit wage costs provide an indication of inflationary pressures in the economy.

Most of the series in this release are designated as National Statistics.  Some service sector estimates use component series from the Index of Services (IOS) which are designated as experimental statistics.  Market sector GVA is also an experimental series.  Labour productivity estimates that use these series as their numerators are also labelled as experimental statistics.

For more information on interpreting these statistics see the background notes to this bulletin, and the forthcoming labour productivity Quality and Methodology Information paper.

Whole economy labour productivity

Figure 1: Whole economy output per worker

United Kingdom

gure 1: Whole economy output per worker
Source: Office for National Statistics

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Figure 2: Whole economy output per hour

United Kingdom

Figure 2: Whole economy output per hour
Source: Office for National Statistics

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Whole economy labour productivity components (seasonally adjusted)

Output Productivity Jobs Productivity Hours
Change on quarter a year ago Change on previous quarter Change on quarter a year ago Change on previous quarter Change on quarter a year ago Change on previous quarter
Per cent    
2009 Q1 -6.6 -1.7 -0.9 -0.4 -3.1 -1.8
Q2 -6.0 -0.4 -2.1 -1.0 -2.5 -0.2
Q3 -4.1 0.2 -1.6 0.0 -3.1 -0.9
Q4 -1.2 0.7 -1.4 -0.1 -2.0 0.9
2010 Q1 0.9 0.4 -1.5 -0.4 -1.3 -1.1
Q2 2.5 1.1 0.4 0.9 0.4 1.4
Q3 3.0 0.7 1.0 0.5 1.4 0.2
Q4 1.9 -0.4 0.7 -0.3 0.4 0.0
2011 Q1 1.7 0.2 1.7 0.6 1.7 0.1
Q2 0.3 -0.2 0.8 0.0 -1.0 -1.2
Q3 0.1 0.5 -0.3 -0.6 -0.8 0.3
Q4 0.2 -0.3 0.0 0.1 -0.4 0.4

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Unit labour costs

In the fourth quarter of 2011, whole economy unit labour costs were 1.2 per cent higher than the previous quarter, the fastest growth since the second quarter of 2009.  About half of this movement was due to lower productivity, and half due to higher labour costs per hour.

Figure 3: Whole economy unit labour costs

United Kingdom

Figure 3: Whole economy unit labour costs
Source: Office for National Statistics

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Manufacturing unit wage costs fell by 0.2 per cent in the fourth quarter to their lowest level since the first quarter of 2008.  This reflects record productivity in the manufacturing sector combined with modest growth in earnings per hour.

Figure 4: Manufacturing unit wage costs

United Kingdom

Figure 4: Manufacturing unit wage costs
Source: Office for National Statistics

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Manufacturing labour productivity

Figure 5: Manufacturing output per job

United Kingdom

Figure 5: Manufacturing output per job
Source: Office for National Statistics

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Figure 6: Manufacturing output per hour

United Kingdom

Figure 6: Manufacturing output per hour
Source: Office for National Statistics

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Since the end of the recession, labour productivity in the manufacturing sector has grown more strongly than in services and the economy as a whole, and reached record levels in terms of both output per job and output per hour in the fourth quarter.  This was despite a fall in manufacturing output in Q4, as jobs and hours worked fell more sharply.  In this period, output per hour in divisions 29-30 (Transport equipment) was more than 40 per cent above its 2008 level and double its level in 2001.

Manufacturing labour productivity components (seasonally adjusted)

Output Productivity Jobs Productivity Hours
Change on quarter a year ago Change on previous quarter Change on quarter a year ago Change on previous quarter Change on quarter a year ago Change on previous quarter
Per cent    
2009 Q1 -12.5 -4.5 -6.8 -2.8 -10.5 -5.7
Q2 -11.0 -0.2 -8.2 -2.1 -8.9 -0.3
Q3 -10.3 -0.9 -6.8 -0.1 -8.3 -1.3
Q4 -4.4 1.2 -5.4 -0.4 -6.1 1.3
2010 Q1 1.3 1.2 -4.4 -1.9 -2.0 -1.6
Q2 3.2 1.6 -2.2 0.2 -0.8 0.8
Q3 5.5 1.3 -1.9 0.1 0.5 0.0
Q4 4.9 0.7 -1.4 0.1 0.0 0.8
2011 Q1 4.3 0.7 0.0 -0.4 2.2 0.6
Q2 2.7 0.0 -1.1 -0.9 -2.1 -3.4
Q3 1.2 -0.1 -2.3 -1.1 -3.8 -1.7
Q4 -0.2 -0.7 -3.3 -0.9 -5.8 -1.4

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Services labour productivity

Figure 7: Services output per job

United Kingdom

Figure 7: Services output per job
Source: Office for National Statistics

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Figure 8: Services output per hour

United Kingdom

Figure 8: Services output per hour
Source: Office for National Statistics

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Across the service sector of the economy, most sections experienced falls in labour productivity in the fourth quarter.  A notable exception was Government services (sections O-Q), where output per hour rose by 0.9 per cent to a record level.  This reflects a combination of falling labour input and rising GVA in these sections.

Elsewhere in the service sector, the largest falls in labour productivity were in section I (Accommodation and food services), section H (Transportation and storage) and section G (Wholesale and retail trade).

Services labour productivity components (seasonally adjusted)

Output Productivity Jobs Productivity Hours
Change on quarter a year ago Change on previous quarter Change on quarter a year ago Change on previous quarter Change on quarter a year ago Change on previous quarter
Per cent    
2009 Q1 -4.6 -0.8 -0.4 -0.1 -2.4 -1.3
Q2 -4.0 -0.2 -1.4 -0.7 -1.4 -0.1
Q3 -2.0 0.4 -0.7 0.3 -2.2 -0.7
Q4 0.3 0.8 -0.5 0.0 -1.0 1.1
2010 Q1 1.0 0.0 -0.6 -0.1 -0.7 -1.0
Q2 1.8 0.5 1.0 0.9 0.6 1.2
Q3 1.9 0.6 1.4 0.6 1.6 0.3
Q4 0.8 -0.3 1.1 -0.3 0.4 -0.1
2011 Q1 1.7 0.9 2.0 0.8 1.7 0.3
Q2 1.3 0.1 1.3 0.1 -0.5 -0.9
Q3 1.6 0.8 0.0 -0.7 -0.4 0.4
Q4 1.8 -0.1 0.5 0.3 0.7 1.0

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Market sector labour productivity - experimental

Market sector output per worker fell by 0.9 per cent in Q4, and market sector output per hour fell by 1.0 per cent.

These falls in labour productivity are larger than for the UK economy as a whole.  This is consistent with relatively strong productivity growth in Government services, noted in the previous section of this bulletin.

Figure 9: Market sector output per hour worked

United Kingdom

Figure 9: Market sector output per hour worked

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Revisions

Reference table R1 (64.5 Kb Excel sheet) shows the overall revisions to growth rates of the main productivity variables for the whole economy, manufacturing and services.

The principal reason for revisions in this release is  revisions to workforce jobs (349.7 Kb Pdf) data, leading to revisions to productivity jobs and productivity hours by industry (see next section for more on productivity jobs and productivity hours).  In addition, GVA data have been revised back to 2011 Q1.  Market sector GVA estimates used in the previous release of this bulletin contained an error which has been corrected in this release.  See this correction notice for more information.

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 2004 Q1 (that is, in June 2004) and compares these with the estimates for the same quarter published three years later (in March 2007).  The difference between these two estimates is calculated, and this process is repeated for five years of data, i.e. for all quarters to 2008 Q4.  The averages of these differences with and without regard to sign are shown in the right hand columns of the table, and these can be compared with the value of the estimates in the latest quarter, shown in the second column. 

This revisions analysis shows that whole economy productivity growth estimates have tended to be revised down over time, by 0.2-0.3 percentage points (on a year-on-year basis), while unit labour cost growth estimates have tended to be revised up by a similar magnitude.  Absolute revisions have been larger for unit labour costs than for productivity.  Were this pattern of revisions to continue into the future, growth of output per hour in Q4 would be revised down from 0.6 per cent (year on year) to 0.4 per cent in three year’s time, and growth of unit labour costs would be revised up from 3.1 per cent to 3.4 per cent over the same period.

Revisions analysis

Revisions between first publication and estimates three years later
   
Whole economy: Value in latest period (per cent) 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 0.2 -0.33 0.58
Output per job. Change on quarter a year ago 0.2 -0.31 0.53
Output per hour. Change on quarter a year ago 0.6 -0.20 0.51
Unit labour costs. Change on quarter a year ago 3.1 0.32 1.09
Unit wage costs. Change on quarter a year ago 3.1 0.14 0.94

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ONS plans to publish a note on the sources of revisions to productivity estimates later in 2012.  More information on revisions to productivity estimates can be found in the Revisions triangles (775.8 Kb ZIP) component of this release, or by emailing productivity@ons.gsi.gov.uk.

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 in Table 9 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 total LFS jobs.  Note that this constraint is applied in non-seasonally adjusted terms.  The nature of the seasonal adjustment process means that the sum of seasonally adjusted productivity jobs by industry (and productivity hours – see below) can differ slightly from the seasonally adjusted LFS totals.

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

Productivity hours are derived by multiplying productivity jobs at an industry level (before seasonal adjustment) 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) 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 nominal 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. Experimental series

    Labour productivity estimates for some service sections use GVA series from the Index of Services IOS) which are designated as experimental, meaning that they are not yet designated as National Statistics.  Market sector GVA is also an experimental series.  Since labour productivity estimates are derived as ratios of these GVA series and corresponding labour input series, the resulting labour productivity estimates are also designated as experimental statistics.

    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

    The criteria for distinguishing between experimental and National Statistics were set out at the launch of the IOS in 2000, and include the proportion of data on which the component series are based, and the existence of suitable quality assurance processes.   ONS published a review of the experimental components of IOS in 2011.

    Details of the market sector GVA methodology can be found in Market sector GVA productivity measures (241.1 Kb Pdf) and Market sector output per hour worked: revisions.

  3. Quality and Methodology

    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.

    Note that a revised and updated Quality and Methodology Information paper will be published on this page shortly, including more information on the uses and limitations of labour productivity estimates.

  4. International comparisons of labour productivity

    ONS publishes international comparisons of labour productivity in levels and growth rates for the G7 countries.

    More international data on productivity is available from the OECD, Eurostat, and the Conference Board.

  5. 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 www.nationalarchives.gov.uk/doc/open-government-licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gsi.gov.uk.

    ONS publishes a pre-release access list for each of its publications, outlining the roles of those people granted access to the bulletin 24 hours before the general public.

    All of the data in this release can be downloaded free of charge from the ONS website.  Additionally, disaggregated data on productivity jobs and productivity hours are available on request. 

    To obtain a full time series of the data from the bulletin or parent release:

    1. Select 'Data in this release' (top right of page)

    2. Select 'datasets associated with this release' (left hand side of page)

    3. Select the latest release.

    4. Select 'Select series from this dataset' (Green button, top right)

    5. Select the reference table of interest.

    6. Select the series of interest (note you can use ctrl and shift to select multiple series for a custom download).

    7. Select 'download'

  6. User engagement

    ONS is keen to develop a greater understanding of the use made of labour productivity statistics.  If you have something to tell us, please use this feedback form, or email us at productivity@ons.gsi.gov.uk.

    You can follow ONS on Twitter: www.twitter.com/statisticsons and Facebook: www.facebook.com/statisticsons and watch our videos at www.youtube.com/onsstats

  7. Statistical contact:

    Mark Franklin

    Tel:  01633 455981

    Email:  productivity@ons.gsi.gov.uk

    © Crown copyright 2012.

  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 ONS productivity@ons.gsi.gov.uk
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