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Labour productivity, hourly compensation and unit labour cost

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Second quarter 2009 (Previous release)

The labour productivity of Canadian businesses did not change in the second quarter, marking the fifth consecutive quarter with little variation. Unit labour cost increased 0.3% in the second quarter, a deceleration from the increases of 0.8% in the first quarter and 1.7% in the fourth quarter of 2008.

Labour productivity unchanged for second consecutive quarter

Since the second quarter of 2008, the real gross domestic product (GDP) of Canadian businesses has changed at roughly the same pace as hours worked, resulting in little change in productivity over the last five quarters. During that period, real GDP and hours worked both declined by 4.9% cumulatively.

Output and hours worked both fell 1.3% in the second quarter of 2009, after dropping 2.1% in the first quarter of the year.

A slight upturn in domestic demand led to an increase in output and productivity in the services-producing industries, which offset a decline in the goods-producing industries.

An upswing in wholesale and retail trade and the financial industries in the second quarter boosted the service sector's productivity by 0.6%, while the goods sector posted a 0.5% decline. After falling sharply in the previous two quarters, manufacturing productivity was almost unchanged, edging down 0.1% in the second quarter.

Hours worked in the goods sector fell 3.2%, a fourth consecutive quarterly decrease. Hours worked also shrank in service industries for a fifth straight quarter, but the rate of decline was much lower than in goods. Service sector hours were down 0.5% in the second quarter, much the same pace as in the previous two quarters.

The labour productivity of American businesses rose 1.6 % in the second quarter, its largest gain in six years. In the previous three quarters, productivity followed essentially the same pattern in the United States as in Canada.

Labour costs per unit of production in Canadian dollars were up 0.3% for Canada in the second quarter, their smallest increase since the second quarter of 2007.

With little change in productivity in the last five quarters, increases in unit labour costs have essentially reflected the advance in hourly compensation.

After five consecutive quarters of depreciation, the Canadian dollar rose 6.7% in value against its US counterpart in the second quarter. That translated into a 7.0% increase in Canadian unit labour costs expressed in American dollars, the first quarterly increase since the second quarter of 2008. In comparison, unit labour costs in American businesses were down 1.5% in the second quarter, their largest drop in nine years.

The labour productivity data for the second quarter of 2009, released today, have been revised back to the first quarter of 2009.

Note: The term "productivity" in this release refers to labour productivity. For the purposes of this analysis, labour productivity, gross domestic product (GDP) and unit labour cost apply to 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.

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

Definitions, data sources and methods: survey number 5042.

On September 18, a more comprehensive analysis about comparing labour productivity growth in Canada and the United States, as well as additional charts and tables, will be available in the second quarter 2009 issue of Canadian Economic Accounts Quarterly Review (13-010-X, free).

Third quarter data of 2009 for labour productivity, hourly compensation and unit labour cost will be released on December 15.

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.

Table 1

Business sector: Labour productivity and related variables for Canada and the United States
  Second quarter 2007 Third quarter 2007 Fourth quarter 2007 First quarter 2008 Second quarter 2008 Third quarter 2008 Fourth quarter 2008 First quarter 2009 Second quarter 2009
  % change from previous quarter, seasonally adjusted
Canada                  
Labour productivity 0.2 -0.1 -0.2 -1.0 0.0 0.1 -0.1 0.0 0.0
Real gross domestic product 1.1 0.4 0.2 -0.5 -0.1 -0.1 -1.5 -2.1 -1.3
Hours worked 0.9 0.6 0.4 0.5 -0.1 -0.2 -1.3 -2.1 -1.3
Hourly compensation 0.2 0.3 1.4 1.1 0.9 0.9 1.5 0.8 0.3
Unit labour cost 0.0 0.5 1.6 2.1 0.9 0.8 1.7 0.8 0.3
Exchange rate1 6.7 5.0 6.5 -2.3 -0.6 -3.0 -14.1 -2.7 6.7
Unit labour cost in US dollars 6.7 5.6 8.1 -0.1 0.3 -2.3 -12.6 -1.9 7.0
United States2                  
Labour productivity 0.9 1.4 0.4 0.0 0.8 0.1 0.2 0.0 1.6
Real gross domestic product 0.9 0.9 0.5 -0.3 0.3 -0.9 -1.9 -2.3 -0.4
Hours worked 0.0 -0.4 0.1 -0.4 -0.5 -1.0 -2.1 -2.3 -1.9
Hourly compensation 0.8 0.7 1.0 0.4 0.4 1.1 0.6 -1.2 0.0
Unit labour cost -0.1 -0.6 0.6 0.3 -0.4 1.0 0.4 -1.2 -1.5
  2004 2005 2006 2007 2008 Third quarter 2008 Fourth quarter 2008 First quarter 2009 Second quarter 2009
  % change from the previous year % change from same quarter of previous year, seasonally adjusted
Canada                  
Labour productivity 0.2 2.4 1.2 0.4 -1.1 -1.0 -1.0 0.0 0.0
Real gross domestic product 3.2 3.2 2.7 2.3 -0.4 -0.5 -2.2 -3.8 -4.9
Hours worked 3.0 0.7 1.6 1.9 0.8 0.5 -1.2 -3.7 -4.9
Hourly compensation 3.3 4.9 5.1 3.6 4.0 4.4 4.6 4.2 3.5
Unit labour cost 3.1 2.4 3.9 3.1 5.2 5.5 5.6 4.2 3.6
Exchange rate1 7.5 7.3 6.8 6.0 0.9 0.3 -19.0 -19.4 -13.4
Unit labour cost in US dollars 10.9 9.9 10.9 9.4 5.9 5.8 -14.5 -16.0 -10.4
United States2                  
Labour productivity 2.9 1.7 1.0 1.8 1.9 1.3 1.1 1.1 1.9
Real gross domestic product 4.2 3.4 3.1 2.2 0.0 -0.5 -2.8 -4.7 -5.3
Hours worked 1.2 1.6 2.1 0.4 -1.9 -1.7 -3.9 -5.7 -7.1
Hourly compensation 3.5 4.0 3.8 4.2 2.7 2.9 2.5 0.9 0.6
Unit labour cost 0.6 2.2 2.8 2.4 0.8 1.6 1.4 -0.2 -1.3
The exchange rate corresponds to the Canadian dollar value expressed in US dollars.
US data are from Bureau of Labor Statistics, Productivity and costs: Second quarter 2009 published in NEWS, September 2.