Labour productivity, hourly compensation and unit labour cost

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The labour productivity of Canadian businesses rose 0.7% in the first quarter, after increasing 1.2% in the fourth quarter of 2009.

The pace of growth in the real gross domestic product (GDP) of businesses accelerated in the first quarter (+1.8%) compared with the previous quarter (+1.4). This acceleration in business output was largely due to spending on consumer goods and services, spending on shelter, and inventory accumulation.

Hours worked in Canadian businesses rose 1.1% in the first quarter, following two quarters of slight gains. That was the highest quarterly growth rate since the second quarter of 2004. Employment was up 0.7%, its biggest increase since the first quarter of 2008 (+0.9%), while hours worked per job increased 0.4%.

The majority of the rise in business productivity was attributable to goods-producing industries, which posted a 1.5% gain, their second consecutive quarterly increase. The largest increases were in manufacturing (+2.3%) and construction (+1.0%). It was the fourth consecutive quarterly increase in manufacturing.

Productivity in services-producing businesses advanced 0.2% in the first quarter after growing 0.9% in the preceding quarter. Productivity in wholesale trade increased 3.3% and is now 14% higher compared with the first quarter of 2009. The accommodation and food services industry posted a 1.5% gain in productivity.

In the United States, productivity gains in the business sector slowed to 0.6% in the first quarter, slightly lower than Canada's growth rate.

In the first quarter, productivity gains in Canadian businesses outpaced the 0.2% increase in hourly compensation. As a result, unit labour costs of Canadian businesses in Canadian dollars fell 0.5%. In the previous three quarters, hourly compensation and productivity grew at a similar rate.

The Canadian dollar continued to appreciate against the American dollar in the first quarter (+1.5%), but at a much slower pace than in the last three quarters of 2009. This was reflected in a 1.0% rise in the unit labour costs of Canadian businesses in American dollars. By comparison, American businesses' unit labour costs declined 0.3% in the first quarter.

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 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 first quarter 2010 labour productivity data released today include revisions to aggregate labour productivity and underlying series (GDP, hours worked, hourly compensation, unit labour costs, etc.) from 2006 to 2009. These updates are consistent with the four-year annual revision to the National Income and Expenditure Accounts released on May 31, 2010. However, the national accounts' data of GDP by industry will not be revised until the end of September 2010 (the usual revision release date for GDP by industry) and therefore will not be incorporated in the productivity data until the release of the third-quarter data in December 2010.

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

Definitions, data sources and methods: survey number 5042.

On June 21, additional tables and links to other releases from the national accounts will be available in the first quarter 2010 issue of Canadian Economic Accounts Quarterly Review, Vol. 9, no. 1 (13-010-X, free). This publication is now available from the Key resource module of our website under Publications.

Second quarter data for labour productivity, hourly compensation and unit labour cost will be released on September 14.

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.