Labour productivity, hourly compensation and unit labour cost

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The labour productivity of Canadian businesses rose 0.7% in the fourth quarter, similar to the gain observed in the third quarter (+0.6%).

Productivity of Canadian businesses increases once again

Chart description: Productivity of Canadian businesses increases once again

The fourth-quarter increase in productivity occurred in a context where business output continued to grow, albeit at a slower pace than in the previous quarter, while hours worked declined for the first time in five quarters.

The growth of the real gross domestic product (GDP) of businesses was 0.5% in the fourth quarter, less than half the growth rate in the previous quarter (+1.2%). The main factor moderating fourth-quarter output was a slowdown in mining and oil and gas extraction, wholesale trade, construction, and finance and insurance services.

At the same time, hours worked in businesses decreased 0.2%, after rising in the previous four quarters. Construction, wholesale trade, and professional, scientific and technical services were primarily responsible for the decline.

Both goods-producing and services-producing businesses contributed to the overall productivity gain in the fourth quarter. The productivity of goods-producing businesses was up 1.1%, its second consecutive quarterly increase, largely a result of gains in manufacturing and construction.

Productivity in the services-producing industries grew 0.5%, following two consecutive quarterly declines. Professional, scientific and technical services, retail trade, and other services were the main contributors to the increase.

For 2011 as a whole, business productivity was up 0.8%, after rising 1.5% in 2010. In comparison, a slight fourth-quarter increase of 0.2% in the United States resulted in the annual growth of productivity in American businesses being 0.2% for 2011, down from 4.0% in 2010. This is the first time since 2006 that productivity has grown faster in Canada than in the United States.

The 2011 difference in productivity between Canada and the United States was mostly the result of a difference in the growth in real GDP of businesses, since the two countries had similar increases in hours worked. Although it slowed in both countries in 2011, real GDP growth was higher in Canadian businesses (+2.6%) than in American businesses (+2.2%).

In Canadian businesses, labour costs per unit of production rose 0.8% in the fourth quarter, after declining 0.6% in the previous quarter. The fourth-quarter increase occurred because average compensation per hour worked (+1.5%) grew more than twice as fast as productivity. In the previous two quarters, average hourly compensation in Canada was almost unchanged.

However, the Canadian dollar was down an average of 4.2% in relation to the US dollar. As a result, Canadian businesses' unit labour costs in US dollars fell 3.4% in the fourth quarter, their second consecutive quarterly decline. By comparison, American businesses' unit labour costs were up 0.7% in the fourth quarter.

For 2011 as a whole, the growth of labour costs per unit of production in American businesses (+2.3%) outpaced that of Canadian businesses (+2.1%), the first time this has occurred since 2006.

The labour productivity figures for the fourth quarter, released today, were revised back to the first quarter of 2011.

Note: Important changes are coming to Canada's System of National Accounts (CSNA), starting in October. These changes will affect all users of CSNA products and statistics such as gross domestic product (GDP), balance of payments, international investment, and input-output tables. For more information, consult the National Economic Accounts website.

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.

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 on CANSIM.

Available without charge in 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 fourth quarter 2011 issue of Canadian Economic Accounts Quarterly Review, Vol. 10, no. 4 (13-010-X, free), available from the Key resource module of our website under Publications. This publication will be updated on March 15, at the time of the release of the national balance sheet accounts.

Labour productivity, hourly compensation and unit labour cost data for the first quarter of 2012 will be released on June 8.

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.