Hours worked and labour productivity in the provinces and territories

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From 1997 to 2008, business sector productivity increased at an annual average rate of 1.3% in Canada. However, productivity growth slowed considerably after 2003 when compared with the 1997-to-2003 period. All provinces experienced a slowdown between the two periods with the main contributors being Ontario, British Columbia and Quebec.

Between 1997 and 2008, annual average growth of labour productivity in the business sector was stronger than, or equal to, the national average in eight provinces. The highest annual average growth rates were posted in Newfoundland and Labrador (+4.5%), Saskatchewan (+2.1%) and Manitoba (+1.9%). These three provinces continued to outpace the national average between 2003 and 2008.

While there was a slowdown in the rate of productivity growth in all provinces and territories after 2003, the productivity growth ranking of the provinces between 2003 and 2008 was similar to the one between 1997 and 2003. The slowdown in manufacturing productivity in the country's two largest provincial labour markets, Ontario and Quebec, was the major factor in the national slowdown of business productivity between 2003 and 2008.

Numerous factors affected labour productivity growth in Canada between 1997 and 2008. From 1997 to 2000, a period of intense economic activity in the information and communications technology sector, Canada's annual average labour productivity growth was 3.0%. This was followed by a slowdown in annual average productivity growth (+0.6%) from 2000 to 2003 as Canadian businesses felt the impact of the downturn in the technology sector, as well as the aftermath of the September 11 attacks in the United States.

From 2003 to 2007, Canada's trade and financial services and manufacturing helped boost annual average productivity growth to 1.0%, even as manufacturing downsized over this period. Although the natural resource sector contributed significantly to the increase in hours worked, it had a negative impact on productivity growth during this period. In 2008, labour productivity declined 0.8% as real gross domestic product (GDP) contracted in the latter part of the year. The results varied widely by province and territory.

Between 1997 and 2008, Newfoundland and Labrador led the country in annual average growth of business labour productivity, while Alberta posted the lowest increase (+0.6%). In both cases, a change in the relative contribution of conventional crude oil extraction to their respective provincial economy played a large role.

Productivity rose 4.5% in Newfoundland and Labrador, the fastest annual average growth rate in the country. This increase occurred as new oil extraction platforms started production during the period. In Alberta, the transition from the traditional oil industry to the more costly oil sands continued. At the same time, Alberta's booming population led to an expansion of the labour-intensive service sector. Both of these changes in Alberta shifted economic activity to sectors with lower average productivity.

Following Alberta, British Columbia was the second province to trail the national average during the period, while Quebec's annual average growth rate was on a par with the national average.

In the labour market, hours worked increased in every province between 1997 and 2008, with Alberta (+2.8%) and British Columbia (+2.0%) well ahead of the other provinces. In Ontario, annual average growth of hours worked in businesses was identical to the national average during the period (+1.8%).

The steady expansion of the employment market led to a 3.7% annual average increase in hourly compensation in Canadian businesses during the 1997-to-2008 period.

Alberta recorded the highest annual average increase in hourly compensation in businesses (+6.4%), followed by Saskatchewan (+5.4%) and Manitoba (+3.8%).

Atlantic provinces

Between 1997 and 2008, the annual average growth in business productivity exceeded the national rate in all of the Atlantic provinces, with Newfoundland and Labrador leading the pack.

The start of production on the oil extraction platforms off Newfoundland and Labrador, and the associated investments, drove the province's annual average productivity growth up to 4.5% between 1997 and 2008, the highest rate in Canada. The introduction of this new capital-intensive industry largely transformed the province's industrial structure.

During this period, growth in hours worked fluctuated between 1.0% and 1.6% in the Atlantic provinces, a slower pace than the national average. Newfoundland and Labrador, thanks to the boom in the oil and gas extraction sector, recorded the largest annual average gain in hours worked among these provinces.

Central Canada

Ontario and Quebec, where much of the export-oriented manufacturing sector is located, had a much lower annual average rate of business productivity growth between 2003 and 2008 than during the 1997-to-2003 period. Ontario experienced declines in labour productivity in 2003 and 2008, and had virtually no growth in labour productivity in 2004. Quebec's labour productivity declined in 2004 and 2008.

Ontario manufacturers' productivity grew at an annual pace of 0.8% between 2003 and 2008, compared with an increase of 2.7% between 1997 and 2003. Similarly, the productivity of Quebec's manufacturing sector slowed from 2.2% to 1.2% between the two periods. The deceleration in manufacturing productivity in the country's two largest provincial labour markets was the major factor in the national slowdown in business productivity between 2003 and 2008.

Western provinces

Among the four western provinces, only Manitoba and Saskatchewan registered annual average productivity growth rates above the national average between 1997 and 2008. Saskatchewan recorded growth of 2.1% and Manitoba 1.9%, as businesses in both provinces increased their output at a faster pace than that of hours worked.

Real GDP in Saskatchewan businesses rose an average of 2.3% between 1997 and 2008, while hours worked edged up 0.1%. The largest decline in hours worked occurred in agriculture (-4.7%). In 2008, businesses in Saskatchewan experienced much faster annual average productivity growth (+2.9%) than businesses in other provinces, as they posted the largest advances in real GDP and hours worked. The increases took place in the context of substantial net migration gains.

Between 1997 and 2008, real GDP in Manitoba businesses grew at an average rate of 2.7% a year, compared with that of 0.8% for hours worked. Most of the increase in real GDP occurred in service-producing industries.

In Alberta, the annual average growth rate of business productivity was lower than the national average. From 1997 to 2008, the transition from the traditional oil industry to the more costly oil sands as well as the booming population in the province, which led to an expansion of the labour-intensive service sector, shifted economic activity to sectors with lower average productivity. Over this period, the province recorded the second highest annual average increase in business output (+3.5%) and the highest growth in hours worked (+2.8%), fuelled in part by the rise in the production capacity for non-conventional oil. The largest gains in hours worked were in mining, oil and gas extraction, construction, as well as in most service industries.

British Columbia was the only province to experience a decrease in productivity between 2003 and 2008, posting an annual average decline of 0.1%. Real GDP and hours worked in the province's businesses both recorded substantial, and similar, gains during the period. Output grew at an annual average rate of 3.1%, while hours worked were up 3.2% per year during the period. The province's output growth was particularly strong in services, a much more labour-intensive sector than goods-producing industries.

The territories

Large construction projects played a major role in the results for businesses in the territories between 1997 and 2008. Nunavut posted the highest productivity growth rate in the territories during the period.

In Nunavut, business productivity grew at an annual average rate of 5.6% during the 1999-to-2008 period. Output was up sharply on average, primarily as a result of the construction sector's strong performance.

In the Northwest Territories, business productivity increased by an annual average of 5.0% from 1999 to 2008, as real output increased at a faster rate than hours worked.

In Yukon, business productivity declined at an annual average rate of 1.3% between 1997 and 2008. Productivity growth in the territory fluctuated widely during this period. Construction work on a number of infrastructure projects continued throughout the period, while the annual average rate of increase in hours worked in this territory's businesses was 2.7%.

Available on CANSIM: tables 383-0010 and 383-0011.

Definitions, data sources and methods: survey number 5103.

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.