Labour productivity, hourly compensation and unit labour cost, second quarter 2021
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Released: 2021-09-03
Second quarter 2021
0.6% 
(quarterly change)
Productivity increases for the first time in a year, as reductions in hours worked more than offset the decline in output
Labour productivity of Canadian businesses rose 0.6% in the second quarter, with the declines in hours worked more than offsetting the decrease in output. This was the first increase in productivity since the second quarter of 2020, when the first lockdown measures were imposed from mid-March to early May 2020.
Chart 1
Business output and hours worked register their first declines in four quarters
Productivity continued to adjust in the second quarter of 2021, following significant ups and downs during the previous five quarters. Productivity increased 2.6% compared with the fourth quarter of 2019, the last quarter unaffected by the COVID-19 pandemic.
During the second quarter, mandatory health measures were reintroduced in most parts of the country in April and May in response to the third wave of the pandemic, then were subsequently relaxed in June. This affected both economic activity and the labour market throughout the quarter. As a result, both business output and hours worked fell, after rising in the previous three quarters. However, hours worked declined more than business output, resulting in productivity growth in the second quarter.
Business output shrinks for the first time since the first lockdown from mid-March to early May 2020
Real gross domestic product (GDP) of businesses was down 0.6% in the second quarter—the first decline in a year. As a result of this decrease, the GDP of businesses fell slightly further from its pre-pandemic level (-3.6% compared with the fourth quarter of 2019).
In the second quarter, disparities between industry sectors remained significant. However, overall, half of the 16 industry sectors exceeded their levels from the fourth quarter of 2019.
Hours worked also decrease for the first time in a year
At the same time, hours worked in the business sector were down 1.1% in the second quarter, after posting increases in the previous three quarters. As a result of this first decline in a year, hours worked were 6.1% below their level in the fourth quarter of 2019. This represents a recovery that is even less advanced than the recovery of business output.
Chart 2
Comparison of changes in business output and hours worked
In the second quarter, hours worked decreased in both goods-producing businesses (-1.6%) and service-producing businesses (-1.0%). In total, there were declines in 12 of the 16 industry sectors, and the recovery in hours worked is still uneven across industry sectors.
Chart 3
Changes in recovery of hours worked by industrial sector, second quarter of 2021
In the business sector, both employment (-0.3%) and hours worked per job (-0.8%) decreased in the second quarter, both down for the first time since the second quarter of 2020. The number of people who had more than one job rose for the fourth consecutive quarter, up 2.1% from the first quarter of 2021. Meanwhile, the number of people who were absent without pay increased sharply (+12.6%), after declining in the previous three quarters.
Impacts of the COVID-19 pandemic on hours worked in the business sector, second quarter of 2021
Estimates of hours worked in the business sector are mainly based on data from the Labour Force Survey (LFS). It should be noted that for hours worked (used to measure productivity), both main and secondary jobs are considered—not only the main job as in the LFS. The main survey for the LFS for the reference period that includes the months of April, May and June does not capture job losses outside the reference weeks. To account for those, as for the previous five quarters, the estimates of hours lost as a result of the pandemic were adjusted using a compilation of supplementary questions added to the LFS questionnaire in May, June and July 2021 for the respective reference months of April, May and June 2021. These adjustments are reflected in the data on hours worked and related measures (including labour productivity) for the second quarter of 2021.
Hours of work lost because of COVID-19 still affect most industry sectors, but do so unevenly
When only workers who were active or on paid leave are taken into account, the net effect of the pandemic on hours worked in the business sector was a loss of 127.0 million hours in the second quarter. This was a smaller loss than in the previous quarter (-138.2 million hours).
At the industrial level, the loss of work hours due to COVID-19 still affected most sectors. However, the extent of these lost hours varied across sectors and was related to their ability to adapt to public health measures aimed at slowing the third wave of the pandemic.
Overall, retail trade, other business services, accommodation and food services, construction, and manufacturing are among the sectors where losses of work hours have persisted the most since the beginning of the pandemic. In the second quarter, nearly 72% of hours lost were in these five sectors, where remote work is rarely possible, because they involve working in close contact with clients and colleagues or require workers to be on site.
In the second quarter, retail trade (-18.4 million hours) posted the largest loss of hours among all industry sectors. It was followed by other business services, with a net loss of 17.3 million hours, and accommodation and food services, with a net loss of 16.5 million hours.
Chart 4
Work hours lost in the second quarter of 2021 as a result of COVID-19, by industry, business sector
Most industry sectors improve their productivity
For the first time since the second quarter of 2020, both goods-producing and service-producing businesses contributed positively to overall productivity growth in the second quarter.
Overall, productivity rose in 12 of the 16 main industry sectors. In contrast, 12 sectors posted declines in the previous quarter.
In the second quarter, transportation and warehousing (-4.2%), other business services (-3.7%), mining and oil and gas extraction (-1.6%), and retail trade (-0.4%) recorded declines in productivity.
In the United States, the labour productivity of businesses rose 0.7% in the second quarter, similar to the 0.6% increase in Canada. However, the productivity gains in both countries reflected different underlying conditions. Unlike Canada, productivity gains in the United States in the second quarter occurred in conditions where real GDP of American businesses (+1.9%) and hours worked (+1.2%) increased.
Growth in unit labour costs accelerates sharply
Labour costs per unit of output of Canadian businesses rose 2.7% in the second quarter, following slight increases in the previous two quarters. This was the highest quarterly growth rate in a year.
The more rapid increase in unit labour costs primarily reflects the rebound in the average compensation per hour worked (+3.2%), following three quarters of decline.
The average value of the Canadian dollar relative to the US dollar increased 3.0% for a second consecutive quarter. Expressed in US dollars, the unit labour costs of Canadian businesses rose 5.9% in the second quarter, the largest increase since the third quarter of 2017 (+9.4%). By comparison, unit labour costs of American businesses grew 0.2%.
Sustainable development goals
On January 1, 2016, the world officially began implementing the 2030 Agenda for Sustainable Development—the United Nations' transformative plan of action that addresses urgent global challenges over the following 15 years. The plan is based on 17 specific sustainable development goals.
The release "Labour productivity, hourly compensation and unit labour cost" is an example of how Statistics Canada supports the reporting on the global sustainable development goals. This release will be used to help measure the following goal:
Note to readers
Volatile data starting in the first quarter of 2020
Data have been quite volatile from one quarter to the next since the first quarter of 2020, reflecting the impacts of the pandemic on economic activity and the labour market. Given the strong variations in the last six quarters, the percentage changes from the pre-pandemic level—i.e., from the fourth quarter of 2019—can better reflect the changes in productivity and related measures than percentage changes from quarter to quarter. However, the quarterly data in Table 1 of this release are presented only in the usual format: the percentage change from the same quarter in the previous year and the change from the previous quarter.
Revisions
With this release on labour productivity and related measures, data were revised back to the first quarter of 2020 at the aggregate and industry levels. These revisions are consistent with those incorporated in the release on quarterly gross domestic product (GDP) by income and expenditure and the release on monthly GDP by industry, released on August 31, 2021.
Productivity measures
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 GDP per hour worked.
Unit labour cost is defined as the cost of workers' wages and benefits per unit of real GDP.
The approach to measuring real output in the business sector differs from the one that is used in the estimates by industry. For the business sector, output is measured using the expenditure-based GDP approach at market prices. This approach is similar to that used for the quarterly measures of productivity in the United States. However, output by industry is based on the value added at basic prices.
All the growth rates reported in this release are rounded to one decimal place. They are calculated with index numbers rounded to three decimal places, which are now available in data tables.
All necessary basic variables for productivity analyses (such as hours worked, employment, output and compensation) are seasonally adjusted. For information on seasonal adjustment, see Seasonally adjusted data – Frequently asked questions.
Next release
Labour productivity, hourly compensation and unit labour cost data for the third quarter of 2021 will be released on December 3.
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