Labour productivity, hourly compensation and unit labour cost, third quarter 2022
Released: 2022-12-01
Third quarter 2022
0.6% 
(quarterly change)
Productivity up again
Labour productivity in Canadian businesses increased 0.6% in the third quarter, after edging up 0.1% in the previous quarter. This was the second consecutive quarterly increase, following seven quarters of declines.
Chart 1
Business output continues to rise, while hours worked are unchanged
The gain in productivity in the third quarter reflects the continued growth in business output, while hours worked were unchanged. In the previous quarter, business output (+0.9%) and hours worked (+0.8%) rose at a similar pace.
Business output continues to grow, but slightly slower than in the previous quarter
Real gross domestic product (GDP) of businesses increased 0.7% in the third quarter, down slightly from the 0.9% gain observed in the second quarter. This is the fifth consecutive quarterly increase.
In the third quarter, output in goods-producing businesses rose 1.0%, a pace comparable to the second quarter (+1.2%). For service-producing businesses (+0.4%), output continued to increase, but at a slower pace than in the previous quarter (+1.2%). Overall, output grew in 12 of 16 main industry sectors.
Hours worked unchanged from previous quarter
Meanwhile, hours worked in the business sector were unchanged in the third quarter, after increasing for four consecutive quarters. Growth in service-producing businesses (+0.5%) was offset by a decrease in goods-producing businesses (-1.0%).
In total, hours worked rose in 12 of the 16 main industry sectors. The sectors to post declines in the third quarter were construction (-1.7%), transportation and warehousing (-1.3%), manufacturing (-1.0%), and real estate services (-0.8%).
Hurricane Fiona, which affected the Atlantic provinces and the Gaspésie/Îles-de-la-Madeleine region of Quebec in September, resulted in a 0.02 percentage-point reduction in the quarterly change in hours worked in the business sector.
The zero growth in hours worked in the third quarter reflects a 0.5% decline in the number of jobs and a 0.5% increase in average hours worked. The number of people with more than one job edged up 0.3% in the third quarter, a ninth consecutive quarterly increase. Meanwhile, the number of people who were absent without pay increased 2.5%, after dropping 7.7% in the second quarter.
Hurricane Fiona in the Atlantic provinces: Impact on hours worked in the business sector, September 2022
As a result of Hurricane Fiona that affected the Atlantic provinces and the Gaspésie/Îles de la Madeleine region of Quebec in September, some employed people living in those regions lost work hours, while others worked more overtime hours in September.
In the business sector, considering only active workers or those on paid leave, about 2.3 million hours of work were lost in September, while 860,000 hours of overtime were worked. Thus, for the quarter just ended in September, the net effect of Hurricane Fiona on hours worked in the business sector was a loss of 1.4 million hours.
Data on hours lost and overtime worked due to Hurricane Fiona are derived from questions added to the October Labour Force Survey questionnaire (for the September reference period) for the Atlantic provinces and the Gaspésie/Îles de la Madeleine region of Quebec.
Data on hours worked and related measures (including labour productivity) for the third quarter were subject to an adjustment to account for these lost hours.
Goods-producing businesses are primarily responsible for the growth in productivity
In the third quarter, productivity growth in the business sector was driven mainly by goods-producing businesses, with productivity increasing by 2.0%, double the pace observed in the previous quarter. In contrast, productivity in service-producing businesses edged down 0.1% in the third quarter after posting a 0.2% advance in the second quarter.
In total, productivity was up in 9 of 16 main industry sectors in the third quarter and was virtually unchanged in manufacturing and administrative services.
In the third quarter, productivity rose sharply in agriculture and forestry (+8.5%), arts, entertainment and recreation (+2.7%), and construction (+2.4%). Conversely, the largest declines were observed in the retail trade (-1.7%) and finance and insurance (-0.9%) sectors.
In the United States, labour productivity in businesses was essentially unchanged in the third quarter, after two quarters of declines. During the third quarter, US business output (+0.7%) and hours worked (+0.6%) increased at a similar pace. Real GDP of American businesses rebounded in the third quarter after falling in the first two quarters of 2022, while hours worked recorded a similar increase to that in the previous quarter.
Growth in unit labour costs slows again in the third quarter
Growth in unit labour costs of Canadian businesses—that is, the cost of labour per unit of output—continued to slow in the third quarter, increasing 0.5%. This is the lowest growth since the first quarter of 2022.
This deceleration in the pace of growth in unit labour costs is the result of a combined effect of productivity growth (+0.6%) and a slowdown in average compensation per hour worked (+1.2%). In the second quarter, hourly compensation rose 1.9%.
In the third quarter, the pace of hourly compensation growth decelerated both in service-producing businesses (+1.0% after increasing 1.9% in the previous quarter) and in goods-producing businesses (+1.8% after rising 2.2% in the previous quarter).
Overall, hourly compensation increased in 12 of the 16 industry sectors in the third quarter. Meanwhile, the agriculture and forestry (-1.3%), wholesale trade (-0.9%), retail trade (-0.9%) and professional services (-0.4%) sectors posted declines. The largest gains were observed in real estate services (+4.3%) and in the information and cultural industries (+4.2%).
The average value of the Canadian dollar relative to the US dollar declined for a third consecutive quarter, decreasing 2.2% in the third quarter. As a result of this depreciation, unit labour costs expressed in US dollars for Canadian businesses fell 1.7%, following two quarters of growth.
By comparison, the unit labour costs of American businesses were up 0.9% in the third quarter, after advancing 2.2% in the previous 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
Revisions
With this release on labour productivity and related measures, data were revised back to the first quarter of 2018 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 November 29, 2022.
This release also incorporates the revised data of Labour Force Survey (released on January 24, 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 fourth quarter of 2022 will be released on March 3, 2023.
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