Labour productivity, hourly compensation and unit labour cost

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The labour productivity of Canadian businesses edged up 0.1% in the third quarter, after falling 0.6% in the second quarter.

The slight increase in business productivity in the third quarter reflected modest growth in the real gross domestic product (GDP) combined with no change in hours worked.

Real GDP growth in Canadian businesses slowed for the second consecutive quarter, edging up 0.1% in the third quarter. Most of the weakness was concentrated in the service industries, as their output declined slightly for the second straight quarter. The output of goods-producing industries continued to increase, but its growth rate was lower than in the three previous quarters.

The volume of hours worked in the business sector was unchanged in the third quarter, after rising 1.2% in each of the previous two quarters. Employment was up 0.5%, following a 1.3% increase in the second quarter, while hours worked per job fell by 0.6%, after holding steady the previous quarter.

In contrast to employment, businesses have not yet gained back the decrease in hours worked, which occurred during the labour market downturn that began in the fall of 2008. During that period, businesses reduced hours worked more than employment.

In the third quarter, the 0.7% increase in the productivity of goods-producing industries was offset by a 0.1% decline in the productivity of service-producing industries. The main contributors to this decrease in productivity were the finance, insurance and real estate sector and the wholesale trade sector.

Most goods-producing industries saw a gain in productivity during the quarter. Productivity increased 2.3% in agriculture industries and 1.0% in manufacturing industries. This was the sixth consecutive quarterly advance in productivity in the manufacturing sector.

In the United States, business productivity rose 0.6% in the third quarter. This result contrasts with the 0.5% decline in the previous quarter.

Labour costs per unit of production increased 0.6% in the third quarter. This was slightly higher than the 0.4% gain the previous quarter.

With little change in productivity, the increase in unit labour costs essentially reflects the gain in hourly compensation (+0.7%).

After five quarters of appreciation, the average value of the Canadian dollar relative to its American counterpart fell 1.1% in the third quarter. With this depreciation, Canadian unit labour costs measured in US dollars fell 0.5% in the third quarter. This was the first decline since the first quarter of 2009.

American businesses saw their unit labour costs remain unchanged in the third quarter, after increasing 1.1% the previous quarter.

The labour productivity figures for the third quarter, released today, were revised back to the first quarter of 2006 at the aggregate level and to the first quarter of 2004 at the industry level.

Note: The term "productivity" in this release refers to labour productivity. For the purposes of this analysis, labour productivity and related variables cover the business sector only. Labour productivity is a measure of real gross domestic product (GDP) per hour worked. Unit labour cost is defined as the cost of workers' wages and benefits per unit of real GDP.

This release incorporates a number of source data revisions: revised GDP by industry released in September; revised Survey of Employment, Payrolls and Hours data, released in March; and the new annual benchmarks for the Economic Accounts labour statistics, published on November 19.

Available on CANSIM: tables 383-0008 and 383-0012.

Definitions, data sources and methods: survey number 5042.

Additional tables and links to other releases from the national accounts can be found in the third quarter 2010 issue of Canadian Economic Accounts Quarterly Review, Vol. 9, no. 3 (13-010-X, free). This publication is now available from the Key resource module of our website under Publications.

Fourth quarter 2010 data for labour productivity, hourly compensation and unit labour cost will be released on March 15, 2011.

For more information, or to enquire about the concepts, methods or data quality of this release, contact the information officer (613-951-3640, iead-info-dcrd@statcan.gc.ca), Income and Expenditure Accounts Division.