Labour productivity, hourly compensation and unit labour cost, second quarter 2022
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Released: 2022-09-02
Second quarter 2022
0.2% 
(quarterly change)
Productivity rises for the first time in two years
Labour productivity for Canadian businesses rose 0.2% in the second quarter, following seven consecutive quarters of decline. This is the first increase in productivity since the second quarter of 2020, which was marked by the first lockdown measures associated with the COVID-19 pandemic.
Chart 1
Business output growth outpaces growth in hours worked for the first time in eight quarters
For the first time since the beginning of the pandemic, business output rose faster than hours worked, resulting in growth in productivity in the second quarter. With this quarterly growth, productivity is now 1.3% below the level observed in the fourth quarter of 2019, the last quarter before the start of the pandemic.
With the lifting of public health measures in almost all regions of the country during the second quarter, businesses were able to carry out their economic activities without any pandemic-related restrictions, such as public capacity limits and mask requirements. As a result, business output in the second quarter continued to grow at a steady pace, posting similar growth as in the first quarter. However, hours worked continued the slowdown that began in the first quarter.
Growth of business output continues at a similar pace as in the first quarter
Real gross domestic product (GDP) of businesses was up 0.9% in the second quarter, similar to the gain in the first quarter. With this increase, business output in the second quarter outpaced its pre-pandemic level for the first time (+0.4% from the fourth quarter of 2019).
Both goods- and service-producing businesses recorded increases in output, with 11 of the 16 main industry sectors posting growth in the second quarter. In particular, sectors such as arts, entertainment and recreation (+20.0%), accommodation and food services (+14.3%) and transportation and warehousing (+5.3%) rebounded significantly, in line with the easing of health restrictions. All three sectors were affected strongly by public health measures that limited their activities.
Hours worked continue to increase, but at a slower pace than in each of the previous three quarters
Hours worked in the business sector rose 0.7% in the second quarter, a fourth consecutive quarterly gain. However, this increase was much smaller than in each of the previous three quarters. Despite this slowdown, hours worked are now 1.7% above their level from the fourth quarter of 2019. This is the first time that business output and hours worked have both surpassed their pre-pandemic levels.
Chart 2
Comparison of changes in business output and hours worked
In the second quarter, hours worked increased 0.9% in service-producing businesses, while they were virtually unchanged in goods-producing businesses (+0.1%). Overall, 9 of the 16 main industry sectors posted an increase in hours worked.
The sectors strongly affected by the pandemic—including accommodation and food services (+7.1%), arts, entertainment and recreation (+4.1%) and transportation and warehousing (+2.0%)—posted sharp increases during the second quarter. The arts, entertainment and recreation sector is now above its pre-pandemic level, while the two other sectors have not yet caught up. In total, the recovery of hours worked in half of the 16 industries is still not complete compared with the fourth quarter of 2019, and the recovery remains uneven across sectors.
Chart 3
Changes in recovery of hours worked by industrial sector, second quarter 2022
The 0.7% increase in hours worked in the second quarter reflects a 1.4% growth in the number of jobs and a 0.7% decline in hours worked per job. The number of people with more than one job rose 1.3% in the second quarter, up for the eighth consecutive quarter. Meanwhile, the number of people who were absent without pay fell 7.7%, after rising sharply in the first quarter (+11.1%).
Impacts of the COVID-19 pandemic on hours worked data used to measure productivity
Estimates of hours worked in the business sector are mainly based on monthly data from the Labour Force Survey (LFS).
As of May 2020, Statistics Canada had added questions to the regular LFS survey on the number of work hours lost and the number of overtime hours worked, due to the COVID-19 pandemic. Data from these added questions were for the month prior to the regular survey month.
Data from these questions allowed Statistics Canada to adjust the estimates of hours worked and related measures (including labour productivity). For the June 2022 reference month, these additional questions were removed from the July 2022 LFS questionnaire. Therefore, Statistics Canada no longer uses this monthly information as of June 2022.
In addition, it was found that the bulk of the impact of the COVID-19 pandemic is now well captured by LFS's reference week. Therefore, it is no longer necessary to add this information. Of course, this could change if there were to be another lockdown and a sudden widespread disruption of economic activity; the questions of lost work hours would then be activated.
For the first time in two years, productivity rises in both goods- and service-producing businesses
In the second quarter, productivity was up in both goods- and service-producing businesses for the first time since the second quarter of 2020. Overall, 11 of the 16 major industry sectors posted productivity gains.
Productivity in goods-producing businesses rose for a third consecutive quarter, up 1.0% in the second quarter, as a result of the increases in agriculture and forestry (+4.4%), mining and oil and gas extraction (+2.8%) and manufacturing (+0.7%). In contrast, productivity declined in construction (-1.1%) and utilities (-0.7%).
Productivity in service-producing businesses increased by 0.3%, following seven consecutive quarterly decreases. Significant increases were observed, in particular, in arts, entertainment and recreation (+15.3%), accommodation and food services (+6.7%), transportation and warehousing (+3.3%), and retail trade (+2.7%). Conversely, decreases were observed in real estate (-3.2%) and wholesale trade (-0.9%).
In the United States, the labour productivity of businesses fell 1.0% in the second quarter, after decreasing sharply in the first quarter (-2.0%). For a second consecutive quarter, US business output declined, while hours worked increased. In the second quarter, GDP of businesses decreased by 0.5%, following a similar 0.6% decline in the first quarter. At the same time, hours worked continued to increase (+0.5%), but at a slower pace than in the first quarter (+1.4%).
Growth in unit labour costs slows
Unit labour costs—that is, labour costs per unit of output—of Canadian businesses were up 2.0% in the second quarter, lower than the 2.8% growth observed in the first quarter.
This slower pace of growth in unit labour costs reflects the increase in productivity, while average compensation per hour worked rose 2.2%, a similar gain as in the first quarter (+2.1%).
In the second quarter, hourly compensation in service-producing businesses was up 2.1%, similar to the first quarter (+2.0%), while goods-producing businesses (+2.4%) posted the same increase as in the first quarter. Overall, hourly compensation rose in 14 of 16 industry sectors.
The average value of the Canadian dollar relative to the US dollar decreased for a second consecutive quarter, falling 0.9% in the second quarter. With this depreciation, unit labour costs expressed in US dollars for Canadian businesses rose 1.1%, after increasing 2.3% in the first quarter.
By comparison, American businesses saw their unit labour costs rise by 2.5%, after posting a significant increase of 3.1% in the first quarter.
Sustainable development goals
On January 1, 2016, the world officially began implementing the 2030 Agenda for Sustainable Development—the United Nations' transformative plan of action that addresses urgent global challenges over the following 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 sustainable development goals. This release will be used to help measure the following goal:
Note to readers
Volatile data starting in the first quarter of 2020
Since the beginning of the health crisis due to COVID-19, quarter-to-quarter data have been particularly volatile, reflecting the impacts of the pandemic and health measures on economic activity and the labour market. Given the strong variations over the last 10 quarters (including the second quarter of 2022), the percentage changes from the pre-pandemic level—i.e., from the fourth quarter of 2019—can better reflect the changes in productivity and related measures than percentage changes from quarter to quarter. However, the quarterly data in Table 1 of this release are presented only in the usual format: the percentage change from the same quarter in the previous year and the percentage change from the previous quarter.
Revisions
With this release on labour productivity and related measures, data were revised back to the first quarter of 2021 at the aggregate and industry levels. These revisions are consistent with those incorporated in the release on quarterly gross domestic product (GDP) by income and expenditure and the release on monthly GDP by industry, released on August 31, 2022.
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 measuring real output in the business sector differs from the one that is 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 third quarter of 2022 will be released on December 1.
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