Productivity growth collapsed after the financial crisis but the most recent data on the UK labour market raise the possibility that the long-awaited revival in productivity (and long forecast by the Bank of England amongst others) might finally be starting to occur. And it might also be raising questions about the strength of the economic recovery, though.



To be precise, GDP growth has recovered in Q2 to 0.7% qoq but employment actually fell by 0.2%. Hours worked were unchanged so this implies that output per hour, i.e. productivity, rose by 0.9% qoq in the second quarter. This should be confirmed when the official data are released on 1 October. This number is encouraging but one swallow does not make a summer. The same growth rate was also achieved two years earlier in Q2 2013 but did not presage a genuine recovery in productivity. For 2013 as a whole, productivity fell by 0.9% and then rose by only 0.3% in 2014.