A year-on-year change compares a value at two dates, generally a year apart, or sometimes separated by a quarter (quarter-on-quarter change). For example, the year-on-year change in a variable in a given Quarter Q corresponds to the change (as a %) obtained between the level of the variable in Q and its level in the same quarter of the previous year (Q-4). The quarter-on-quarter change is obtained by calculating the difference between the variable in Q and its level in the previous quarter (Q-1). When the variable is monthly, year-on-year change is calculated between the level in a given month and that in the same month of the previous year (for example, December in year N and December in N-1). However, the change in the annual average compares the average of one year and the average of the previous year.
For example, a phrase such as "In 2006, salaried employment increased by..." can have two meanings, depending on whether reference is being made to average salaried employment in the course of 2006 and the average for 2005, or whether a year-on-year comparison is being made between the situation on 31 December 2006 and on 31 December 2005.
These two trends can be very different. For example, if there was strong growth in year N-1 and a small decline in year N, then the change in annual averages may be positive, while year-on-year change is negative.
The notion of year-on-year change generally applies to values that are like a stock, meaning that they are measurable at a given moment, while annual averages may be more relevant for values that are flows by nature (e.g. the number of hours worked in the course of a period).