Labour productivity, hourly compensation and unit labour cost, third quarter 2012

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The labour productivity of Canadian businesses fell 0.5% in the third quarter, following a 0.6% decline the previous quarter. It was the second consecutive decrease after three quarterly gains.

Chart 1 
Productivity in Canadian businesses declines once more
Chart 1: Productivity in Canadian businesses declines once more

Chart description: Productivity in Canadian businesses declines once more

CSV version of chart 1

The decline in productivity in the third quarter took place in a context where business output remained at the same level as in the previous quarter, while hours worked continued to grow, though at a slower pace than in the previous quarter.

The real gross domestic product of Canadian business was unchanged in the third quarter, following four quarters of growth. Higher production in service-producing businesses was offset by a decline in the output of goods-producing businesses.

At the same time, hours worked in the business sector increased 0.4%, after rising 1.1% the previous quarter. All service industries were up, except retail trade and the information and cultural industries. Employment in businesses edged down 0.1% in the third quarter, while average hours rose 0.5%.

For a second consecutive quarter, productivity declined in both goods-producing and service-producing businesses.

Goods-producing businesses saw a 0.2% decrease in productivity in the third quarter. A decline in productivity for mining and oil and gas extraction (-3.1%) more than offset productivity gains in construction (+1.0%) and manufacturing (+0.5%).

In the service-producing sector, productivity decreased 0.4% in the third quarter, a decline similar to the one observed in the previous quarter. With the exception of retail trade (+0.4%) and the information and cultural industries (+1.9%), productivity was down in every service-producing industry during the quarter. A 1.8% decline in wholesale trade was the main contributor to the sector's downward movement.

In the United States, productivity growth in American businesses reached 0.6% in the third quarter, after advancing 0.4% the previous quarter.

In Canadian businesses, the growth rate of labour costs per unit of production accelerated to 1.3% in the third quarter. This was the highest quarterly growth rate since the first quarter of 2009 when it reached 1.4%.

The increase in the unit labour cost in the third quarter was attributable to the decrease in productivity combined with a faster rate of growth in average compensation per hour worked, which rose from 0.1% in the second quarter to 0.9% in the third quarter. This was the fourth straight quarter in which hourly compensation in Canada grew faster than productivity.

The unit labour costs of Canadian businesses in US dollars rose 2.9% after edging down 0.1% in the previous quarter. It was the second increase in five quarters. The advance was partly because of an average 1.5% increase in the value of the Canadian dollar relative to the US dollar during the quarter.

In comparison, American businesses saw their unit labour costs decline 0.4%, after edging down 0.1% in the second quarter and growing 1.5% in the first quarter.

Note to readers

With this release, data were revised back to the first quarter of 2012 at the aggregate level and to the first quarter of 2011 at the industry level.

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 gross domestic product (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 CANSIM table383-0008 and CANSIM table383-0012.

Definitions, data sources and methods: survey number survey number5042.

Additional tables and links to other releases from the national accounts can be found in the third quarter 2012 issue of Canadian Economic Accounts Quarterly Review, Vol. 11, no. 3 (Catalogue number13-010-X, free), available from the Key resource module of our website under Publications. This publication will be updated on December 13, at the time of the release of the Financial Flow and National Balance Sheet Accounts.

Labour productivity, hourly compensation and unit labour cost data for the fourth quarter will be released on March 8, 2013. Meanwhile, revised estimates of labour productivity up to the third quarter, to incorporate the historical revision to the data on productivity by industry in the business sector and underlying series (gross domestic product, hours worked, hourly compensation, unit labour costs, etc.) will be released on February 14, 2012. These revisions at the industry level will extend back to the first quarter of 2007 and will be consistent with the historical revision to the gross domestic product by industry of Industry Accounts Division, to be released on January 31, 2013.

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; or Media Relations (613-951-4636;