Economic Perspectives –

Labour market continues to recover, and GDP grew 0.4% in August

The latest Perspective from Ruth Lea CBE, Economic Adviser to Arbuthnot Banking Group.


18th October 2021


Ruth Lea CBE


In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest economic developments:

  • The labour market has continued to recover. The number of payroll employees increased by 207,000 to a record 29.2mn in September.
  • The latest data for the three months to August, showed that employment and the employment rate had improved in the quarter and total hours worked had risen. The unemployment rate eased to 4.5%, the inactivity rate fell in the quarter, whilst the redundancy rate was similar to pre-pandemic levels.
  • Vacancies rose in the three months to September to a record high of 1,102,000.
  • Annual growth in average total pay (including bonuses) was 7.2% and regular pay (excluding bonuses) was 6.0% among employees for the three months to August 2021. Allowing for base and compositional effects the ONS estimated that the “underlying” annual increase in regular earnings was still as high as 4.1%-5.6% in nominal terms.
  • GDP increased by 0.4% (MOM) in August but was still 0.8% below pre-pandemic February 2020.
  • Services output rose 0.3% (MOM), boosted by improving consumer-facing industries, and production output rose 0.8% (MOM) as the extraction of crude petroleum and natural gas continued to recover, but construction contracted again (by 0.2% (MOM)).
  • The August GDP press release included back revisions. July’s GDP (sic) is now estimated to be just 1.5% lower than in January 2020. In the previous press release it was estimated to be 2.4% lower.
  • It has been reported that the Chancellor asked the OBR to produce the Budget forecasts using “out-of-date” figures. Subsequently, the OBR’s cut-off date for data revisions was 24 September. The latest GDP data will, therefore, be omitted from the OBR’s calculations. There was speculation that the decision could help the Chancellor “resist last-minute bids for extra public spending by government departments”.
  • There was a modest deterioration in the total trade deficit (goods and services, including precious metals) with a deficit of £3.7bn in August, compared with a deficit of £2.9bn in July. The deterioration mainly reflected an adverse movement in precious metals.
  • The IFS, in their Green Budget, concluded “…despite planning biggest tax rises in more than 25 years, and an historic increase in size of the state, the Chancellor is still likely to have little money for hard-pressed public services”.

Other news:

  • The IMF marginally revised down the overall global GDP growth rate for 2021 in their October World Economic Outlook, partly reflecting downgraded prospects for some advanced economies, partly due to supply disruptions. On inflation they judged that long-term inflation expectations remained anchored.
  • The European Commission has issued proposals for easing checks on trade from Great Britain to Northern Ireland. The proposals will form the basis for UK-EU negotiations on the issue. 

Ruth Lea said “The latest slew of economic data suggest that domestic recovery is continuing, despite the well-publicised supply problems and rising inflation. Moreover, the global recovery is continuing, despite difficulties. The economic background to the forthcoming Budget is, therefore, fairly favourable, though, of course, there are reservations.”





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Author -

Ruth Lea CBE

Ruth Lea CBE

Economic Adviser, Arbuthnot Banking Group

Ruth Lea CBE has been Arbuthnot Banking Group’s Economic Adviser since 2007 and was an Independent Non-Executive Director from 2005-2016.

Ruth co-founded Global Vision in 2007 and was Director until 2010, and was previously the Director of the Centre for Policy Studies (from 2004 to 2007), Head of the Policy Unit at the Institute of Directors (from 1995 to 2003) and Economics Editor at ITN (from 1994 to 1995).  Prior to ITN she was Chief UK Economist at Lehman Brothers, Chief Economist at Mitsubishi Bank, worked for 16 years in the Civil Service (the Treasury, the DTI, the Civil Service College and the Central Statistical Office) and was an economics lecturer at Thames Polytechnic (now the University of Greenwich).

She is the author of many papers and articles on economic issues and has been a Governor of the London School of Economics and Council Member of the University of London.

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