Labour productivity, hourly compensation and unit labour cost, second quarter 2016
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Second quarter 2016
Labour productivity posts its first decline in four quarters
Labour productivity of Canadian businesses fell 0.3% in the second quarter, after increasing 0.4% in the first quarter. The decline occurred against a backdrop of temporary difficulties resulting from the wildfire in northern Alberta, which affected both output and labour.
The productivity decline in the second quarter reflected the fact that the decrease in business output was more pronounced than the decline in hours worked.
Real gross domestic product (GDP) of businesses was down 0.8% in the second quarter, after advancing 0.6% in the previous quarter. This was the sharpest quarterly decrease in production since the second quarter of 2009 (-1.6%). Due to the impact of the wildfire in northern Alberta on production, goods-producing businesses, in particular those involved in mining, quarrying, and oil and gas extraction, were the main contributors to the second-quarter decrease in GDP in the business sector. By contrast, production in service-producing businesses continued on an upward trend that began in the first quarter of 2013.
At the same time, hours worked on production in the business sector fell 0.5%, after increasing 0.2% in the first quarter. This was the first decrease in two years. Hours worked in goods-producing businesses declined 1.3% in the second quarter, while hours worked in service-producing businesses edged down 0.2%. Mining, quarrying, and oil and gas extraction (-6.2%) posted the largest decrease, as a result of difficulties in non-conventional oil extraction. The wildfire in the Fort McMurray area in May resulted in a reduction of 0.2 percentage points in the quarterly change in hours worked.
The productivity decline in the second quarter was attributable to goods-producing businesses (-0.9%). Labour productivity decreased in mining, quarrying, and oil and gas extraction (-0.6%) and manufacturing (-0.1%). On the other hand, productivity rose in utilities (+1.2%) and agriculture and forestry (+0.9%). Construction was virtually unchanged (+0.1%).
Service-producing businesses posted a 0.6% increase in productivity in the second quarter, mainly as a result of sharp increases in real estate (+2.7%), wholesale trade (+1.9%) and professional services (+1.2%).
In the United States, labour productivity of businesses declined for a third consecutive quarter, down 0.2% in the second quarter. This decrease was the result of a larger increase in hours worked (+0.5%) than in real business output (+0.3%). Hours worked also increased more rapidly than output in the two previous quarters.
Unit labour costs increase
For Canadian businesses, the labour cost per unit of output rose 0.7% in the second quarter, after falling 0.5% in the first quarter.
In the second quarter, growth in the unit labour cost reflected a 0.4% increase in the average compensation per hour worked combined with a 0.3% decrease in productivity. In the previous quarter, hourly compensation in the business sector edged down 0.1%.
In the second quarter, hourly compensation rose 0.8% in goods-producing businesses and 0.3% in service-producing businesses. Hourly compensation was up in all major industrial sectors during the quarter, except accommodation and food services (-2.2%) and finance and insurance (-1.0%).
After three quarters of depreciation, the average value of the Canadian dollar relative to the US dollar rose 6.7% in the second quarter. Given this appreciation, the unit labour cost in US dollars for Canadian businesses was up 7.5%, the first increase in four quarters.
By comparison, the unit labour cost of American businesses rose 0.4%, after posting no growth in the previous quarter.
Business sector: Labour productivity and related variables for Canada and the United States – Seasonally adjusted
Note to readers
With this release on labour productivity and related measures, data were revised back to the first quarter of 2016 at the aggregate level and to the first quarter of 2015 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.
All necessary basic variables for productivity analyses (such as hours worked, employment, output and compensation) are seasonally adjusted. For information on seasonal adjustment, see Seasonally adjusted data – Frequently asked questions.
Labour productivity, hourly compensation and unit labour cost data for the third quarter will be released on December 2.
The System of Macroeconomic Accounts module, accessible from the Browse by key resource module of our website, features an up-to-date portrait of national and provincial economies and their structure.
The Methodological Guide: Canadian System of Macroeconomic Accounts (13-607-X) is available from the Browse by key resource module of our website, under Publications.
The User Guide: Canadian System of Macroeconomic Accounts (13-606-G) is also available from the Browse by key resource module of our website, under Publications. This publication will be updated to maintain its relevance.
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