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Labour productivity, hourly compensation and unit labour cost, fourth quarter 2018

Released: 2019-03-06

Quarterly labour productivity

Fourth quarter 2018

-0.4% decrease

(quarterly change)

Productivity declines for the second time in four quarters

Labour productivity of Canadian businesses decreased 0.4% in the fourth quarter, after rising the two previous quarters.

This decline reflected the continued growth in hours worked, while business output remained at about the same level as in the previous quarter.

Chart 1  Chart 1: Productivity of Canadian businesses decreases in the fourth quarter
Productivity of Canadian businesses decreases in the fourth quarter

Real gross domestic product (GDP) of businesses was unchanged in the fourth quarter, following nine quarterly increases. The output growth in services-producing businesses (+0.5%) was offset by a decline in the output of goods-producing businesses (-0.9%).

At the same time, hours worked in the business sector grew 0.4%, a rate similar to the previous quarter (+0.3%). Hours worked increased 1.1% in goods-producing businesses, while there was little change in services-producing businesses (+0.1%). Hours worked rose in 10 of the 16 main industry sectors. Agriculture and forestry (+4.0%), construction (+1.9%), and wholesale trade (+1.5%) posted the largest gains. Conversely, mining, quarrying, and oil and gas extraction (-1.4%), utilities (-1.2%) and information and cultural industries (-1.2%) reported the largest decreases.

The productivity decline in the fourth quarter was concentrated in goods-producing businesses, which decreased 1.9% after edging down 0.1% in the previous quarter. Productivity in services-producing businesses increased 0.4%, following 0.2% growth in the third quarter.

Construction (-4.6%), agriculture and forestry (-3.9%) and wholesale trade (-1.8%) were the main sources of productivity decline among industry sectors in the quarter. Transportation and warehousing services (-0.7%), manufacturing (-0.4%) and retail trade (-0.3%) also contributed to the decrease.

Faster growth in unit labour costs in the fourth quarter

Labour costs per unit of output in Canadian businesses increased 1.2% in the fourth quarter, after edging up 0.1% in the third quarter. This was the highest growth since the fourth quarter of 2017 (+1.6%)

The faster growth in unit labour costs reflected the higher average compensation per hour worked (+0.8%), combined with lower productivity (-0.4%) in the quarter.

In the fourth quarter, average hourly compensation in services-producing businesses rose 1.0%, while it increased 0.2% in goods-producing businesses. Average hourly compensation was up in every major industry sector except agriculture and forestry (-1.5%), construction (-0.9%), wholesale trade (-0.4%) and professional services (-0.2%). Accommodation and food services (+2.5%), arts, entertainment and recreation (+2.2%), manufacturing (+2.0%) and finance and insurance (+1.8%) posted particularly strong gains.

The average value of the Canadian dollar relative to the US dollar declined for the third consecutive quarter, decreasing 1.0% in the fourth quarter. As a result, unit labour costs expressed in US dollars for Canadian businesses were unchanged, after two consecutive quarterly declines.

Year 2018

For the year 2018, labour productivity of Canadian businesses was unchanged, following a 1.9% increase the previous year. This reflected the fact that real GDP of businesses and hours worked increased at the same pace.

Real GDP of businesses grew at a slower pace in 2018 (+1.6%) than in 2017 (+3.4%), while hours worked (+1.6%) increased at a similar pace.

Unit labour costs of Canadian businesses rose 2.5% in 2018, following 0.8% growth in 2017.

With no change in productivity in 2018, the increase in unit labour costs was mainly the result of growth in average compensation per hour worked (+2.6%).

In 2018, the average value of the Canadian dollar relative to the US dollar (+0.1%) was virtually unchanged. As a result, unit labour costs in US dollars for Canadian businesses (+2.6%) increased at a pace similar to that registered when not adjusted for the exchange rate.


Sustainable Development Goals

On January 1, 2016, the world officially began implementation of the 2030 Agenda for Sustainable Development—the United Nations' transformative plan of action that addresses urgent global challenges over the next 15 years. The plan is based on 17 specific sustainable development goals.

The release "Labour productivity, hourly compensation and unit labour cost" is an example of how Statistics Canada supports the reporting on the Global Goals for Sustainable Development. This release will be used in helping to measure the following goal:

  Note to readers

Revisions

With this release on labour productivity and related measures, data were revised back to the first quarter of 1997 at the aggregate and industry levels. These revisions are consistent with those incorporated in the annual benchmarks on provincial and territorial labour productivity and related measures, published on February 22, 2019. As well, indexes of all series were subject to historical revision going back to1981, as a result of revisions to the values for the 2012 reference year. However, the resulting growth rate revisions were negligible.

Due to the shutdown for some US federal agencies providing source data, the publication of preliminary data on American productivity and related measures for fourth quarter and annual average 2018 did not occur as scheduled on February 6, 2019. Therefore, for the purpose of comparison, American data for this reference period will not be mentioned in this release.

Productivity measures

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.

The approach to measure the real output in the business sector differs from the one that used in the estimates by industry. For the business sector, output is measured using the expenditure based GDP approach at market prices. This approach is similar to that used for the quarterly measures of productivity in the United States. However, output by industry is based on the value added at basic prices.

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 in data tables.

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.

Next release

Labour productivity, hourly compensation and unit labour cost data for the first quarter will be released on June 5.

Products

The Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X) is available.

The User Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-606-G) is available.

The Methodological Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-607-X) is available.

Contact information

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca) or Media Relations (613-951-4636; STATCAN.mediahotline-ligneinfomedias.STATCAN@canada.ca).

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