The impact of the Labour Force Survey reweighting on productivity estimates

By Raquel Ortega-Argilés

On 3 December 2024, the ONS published a commentary on the crucial and impactful reweighting of the Labour Force Survey (LFS).

Motivation for the reweighting

The motivation for reweighting the Labour Force Survey (LFS) is to ensure that the survey results accurately reflect the most recent population estimates. Among the main reasons for the reweighting, the following can be found as part of the explanation to improve the estimates:

1. Updated Population Estimates

• • The reweighting incorporates the latest population estimates, which have shown more substantial growth since mid-2022. This helps to provide a more accurate representation of the UK population aged 16 to 64.

2. Improved Accuracy

• • The reweighting improves the accuracy of labour market estimates by using more recent UK population data. These include employment, unemployment, and economic inactivity levels, crucial for understanding UK labour market dynamics.

3. Reduction of Discrepancies

• • The reweighting helps to reduce discrepancies between different data sources. For example, it significantly reduces the gap between LFS employment data and payroll estimates, leading to a more coherent and reliable set of statistics.

4. Addressing Errors

• • The reweighting process also addresses any errors in previous weighting methods. For instance, an error in the weighting method used for Northern Ireland was corrected during this reweighting exercise.

5. Reflecting Demographic Changes

• • The reweighting takes into account demographic changes, such as the relative increases in the population aged between 16 and 24 years and the number of women in the workforce. These changes impact the rates of economic inactivity and employment.

Overall, the reweighting ensures that the Labour Force Survey results are more representative of the current population and labour market conditions, providing a clearer and more accurate picture for policymakers and analysts.

Summary of the reweighted Labour Force Survey release

The reweighting of the Labour Force Survey has led to several significant changes in key indicators. The UK population estimates for those aged 16 to 64 years increased by 484,000 (1.1%) from April to June 2024. The seasonally adjusted employment level rose by 402,000, while the unemployment level increased by 30,000, and the economically inactive level rose by 60,000. The employment rate was revised up by 0.1 percentage points to 74.6%, while the unemployment rate remained largely unchanged at 4.2%, and the economic inactivity rate decreased by 0.1 percentage points to 22.1%. Compared with pre-COVID levels, the overall employment level is now 313,000 above those levels. Regional differences were noted, with Scotland experiencing the biggest revisions due to population changes from their 2022 Census, and Northern Ireland revisions mainly correcting an error in the weighting method. Additionally, productivity estimates showed downward revisions, with growth estimates for output per hour worked revised down from -0.3% to -0.9%, and output per worker from 0.9% to 0.3%.

Potential impacts on labour productivity statistics

The reweighting of the Labour Force Survey (LFS) can have several potential impacts on labour productivity statistics:

1. Revised Employment Levels

• • Increased Employment: The reweighting has led to an increase in the estimated number of employed individuals. For example, the employment level was revised up by 402,000 for April to June 2024. This higher employment level can affect productivity measures, as productivity is often calculated as output per worker or output per hour worked.

2. Output per Hour Worked

• • Downward Revision: The reweighting has resulted in a downward revision of output per hour worked. For instance, the growth for output per hour worked was revised down from -0.3% to -0.9% for April to June 2024. This indicates that the productivity per hour worked is lower than previously estimated.

3. Output per Worker

• • Downward Revision: Similarly, output per worker was revised down from 0.9% to 0.3% for the same period. This suggests that the overall productivity per worker has decreased due to the reweighting.

4. Impact on Productivity Growth Rates

• • Revised Growth Rates: The reweighting has led to changes in the growth rates of productivity measures. For example, the indicative estimates of growth for both output per hour worked and output per worker were revised downwards by 0.6 percentage points for April to June 2024 compared with a year ago.

5. Volatility in Estimates

• • Increased Volatility: The reweighting process can introduce more volatility into the productivity estimates. This is because the adjustments are based on updated population data, which can fluctuate. Therefore, caution is advised when interpreting short-term changes in productivity statistics.

6. Alignment with Other Data Sources

• • Improved Coherence: The reweighted LFS employment data reduce the gap between LFS and payroll estimates of the number of employees. This improved coherence can lead to more accurate and reliable productivity statistics.

Overall, the LFS’s reweighting provides a more accurate representation of the UK labour market, which in turn affects the calculation of productivity statistics. These adjustments help ensure productivity measures reflect the most current and accurate data.

It has to be noted that, as indicated in the latest ONS release on the reweighting of the Labour Force Survey published on December 3rd, 2024, the reweighted estimates of output per hour worked and output per worker are indicative. Therefore, the estimates for Quarter 3 (July to September) 2024 will be the lead measures until the next Productivity Flash Estimate and Overview publication on February 18th, 2025 (read a commentary on the latest productivity data release) and the estimates for regional productivity remained as the lead measures until the next Sub-national Productivity estimates to be published in June 2025.