Productivity is still a problem: Five takeaways from today’s economic data
Wages are up even as unemployment grew in the three months to the end of September, according to the latest statistics released today.
If you missed our news story earlier today, here are the biggest takeaways from the latest tranche of economic data.
Productivity is still problematic
UK productivity dropped in the third quarter as the number of hours worked actually increased by one per cent.
Output per hour fell 0.4 per cent in the three months to September, the Office for National Statistics said in a flash estimate.
Gross value added grew 0.6 per cent but was offset by a one per cent increase in the number of hours worked.
The increase came primarily from full-time and part-time employees working longer hours, but also by a small increase in employment.
“The relapse in the third quarter reinforces concerns over the UK's overall poor productivity record since the deep 2008/09 recession,” Howard Archer, analyst at EY Item Club said.
He added: “The UK’s “productivity puzzle” is a source of much debate and analysis.
“Part of the UK’s recent poor labour productivity performance has undoubtedly been that low wage growth has increased the attractiveness of employment for companies.
Wages are growing at the highest rate since before the financial crisis
The ONS also revealed that wages grew at their fastest rate in a decade over the period, rising 3.2 per cent excluding bonuses.
Adjusted for price inflation, average weekly earnings grew 0.9 per cent to £493 from £478 this time last year.
“This is a reason for celebration for UK workers, marking the highest wage growth since the three months to December 2008,” AJ Bell analyst Russ Mould said.
“The past few years have seen British workers pummelled by a combination of higher inflation and very sluggish wage growth, meaning they have often faced a real terms wage cut,” he added.
Interest rates may increase
Personal finance analyst at Hargreaves Lansdown, Sarah Coles, said potential Bank of England interest rate rises could become more likely if the wage growth has an impact on inflation.
She said: “We’re unlikely to see major rate hikes while so much uncertainty remains over Brexit.
“However, the two or three rises pencilled in for the next couple of years are now increasingly likely to come to fruition.”
Both employment and unemployment grew
The unemployment rate rose to 4.1 per cent, from four per cent in the previous quarter but lower than the 4.3 per cent the previous year.
In a slowing down of the jobs boom, the number of people in employment rose by 23,000 from the previous quarter.
Brexit and skills shortages hit job market
Meanwhile the number of EU nationals working in the UK fell by 132,000 – the largest annual fall since records began in 1997.
ONS senior statistician Matt Hughes said: “The recent uptick in British nationals in work and the decline in workers from the so-called A8 eastern European countries both seem to be accelerating.”
The British Chambers of Commerce (BCC) said Brexit uncertainty and skills shortages were beginning to weigh on the jobs market.
Head of economics Suren Thiru said: “There is clear evidence of a deep-rooted skills gap across the UK which is constraining business growth.
“To plug skills shortages, the government must deliver a post-Brexit migration system that enables access to the skills needed at all levels to help grow our economy.”