Labour productivity, hourly compensation and unit labour cost

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The labour productivity of Canadian businesses fell 0.8% in the second quarter, following gains of 0.5% in the first quarter and 1.2% in the fourth quarter of 2009.

The productivity decline in the second quarter reflected a slowdown in business output, combined with a rise in hours worked.

The pace of growth in the real gross domestic product of businesses slowed in the second quarter, up 0.5% compared with 1.7% the previous quarter. Output in the second quarter was moderated primarily by a decline in services industries. However, the output in goods producing industries (+1.9%) continued to increase in the second quarter, but at a slower pace than in the previous quarter.

At the same time, the labour market remained dynamic, as employment and hours worked in Canadian businesses both rose 1.3%. This was the highest quarterly rate of growth in hours worked since the fourth quarter of 2003 (+1.4%).

The largest contributor to the overall decline in business productivity was services-producing businesses, which saw their productivity fall 1.0% following five consecutive positive quarters. The downturn was widespread, with retail trade (-2.3%) registering the largest decrease.

Productivity for goods-producing businesses edged down 0.2% in the second quarter, following significant advances in the previous two quarters. There was no change in manufacturing productivity, following increases in the preceding four quarters.

In the United States, the productivity of American businesses declined by 0.5% in the second quarter. This was the first decline since the fourth quarter of 2008.

In the second quarter, productivity in Canadian businesses shrank faster than hourly compensation (-0.3%). As a result, Canadian business unit labour costs in Canadian dollars increased by 0.5%, the first quarterly increase in a year.

The value of the Canadian dollar (+1.2%) continued to climb against its American counterpart in the second quarter, but its rate of appreciation was lower than in the previous four quarters. This was reflected in a 1.8% increase in the unit labour costs of Canadian businesses in US dollars, which were up for the fifth consecutive quarter.

By comparison, unit labour costs for American businesses edged up 0.3% in the second quarter, following three quarterly declines.

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 labour productivity figures for the second quarter, released today, were revised back to the first quarter of 2010 at the aggregate level and to the first quarter of 2009 at the industry level.

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 second quarter 2010 issue of Canadian Economic Accounts Quarterly Review, Vol. 9, no. 2 (13-010-X, free). This publication is now available from the Key resource module of our website under Publications.

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