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In this paper, we compare recent revisions to the labour productivity estimates in Canada and the United States. These regular revisions to preliminary estimates extend back four years (2006 to 2009).
Revisions to Canadian labour productivity estimates were made in June 2010 and incorporate the latest available estimates of gross domestic product 1 (GDP) and the annual benchmarks on hours worked. These revisions relate to the last four years (2006 to 2009). Preliminary productivity data are produced on the basis of preliminary GDP and hours worked estimates, which are eventually revised when additional and more precise data sources become available.
In August 2010, revisions were also made to labour productivity estimates 2 in the United States for the period 2007 to 2009, resulting from revisions to the United States estimate of GDP and hours worked.
2 Revision process
The estimates of labour productivity (output per hour worked) that are produced by the Canadian Productivity Accounts are subject to two types of revisions.
The first type of revision is a series of annual revisions in the GDP that goes back over a four-year period (Statistics Canada, 2010). For example, with this revision cycle, the preliminary estimate of GDP first released in February of 2006 was revised annually over the four subsequent annual revisions cycles, as more detailed and accurate data become available to the Canadian System of National Accounts (CSNA).
Preliminary estimates of GDP by industry are derived from benchmark estimates using a small number of readily measured series (for example, the GDP in Taxi and Limousine Services industry is projected from the Survey of Employment, Payrolls and Hours [SEPH] estimate of employment growth). The industry estimates are gradually supplemented with more detailed and accurate data that are obtained from surveys such as the Annual Survey of Manufactures and from administrative tax records that become available after a lag of one or two years. Similarly, preliminary estimates of expenditure-based GDP are also calculated from data sources that are eventually replaced by more comprehensive information.
In addition, the labour productivity estimates for year t are revised in year t+1 as new information on hours worked becomes available (improving the first estimates of employment and hours worked that are made using the Labour Force Survey [LFS] and SEPH). These revisions improve the estimates of hours worked because more precise measures of holidays and other non-random events are used (Maynard 2005). Revisions also occur if the employment estimates for the non-commercial sector are revised. This is because the business sector estimate is obtained residually after removing the non-commercial sector from the total economy.
The second type of revision, referred to as historical or comprehensive revisions, occur less frequently, about once or twice every 10 years 3 . Historical revisions of the CSNA are occasionally carried out to eliminate breaks in some series, to modify classification standards (for example, the movement from the Standard Industrial Classification to the North American Industry Classification System) or to introduce conceptual and methodological changes.
Historical revisions also occur in the employment and hours worked data when the LFS is occasionally re-benchmarked against data from the most recent Census of Population. The CSNA is currently planning a historical or comprehensive revision with the results to be published in June 2012. The results presented below pertain to the first type of revisions noted above.
3 Impact of revisions on labour productivity
In this section, we compare recent revisions to the labour productivity estimates for the business sector in Canada and the United States.
Revisions to Canadian labour productivity estimates were made in June 2010 in order to incorporate the latest available estimates of GDP estimates 4 . These revisions relate to the last four years (2006 to 2009). The revisions to estimates of labour productivity, GDP and volume of hours worked, which extend back to 2001, are presented in Tables 1 to 3. These tables show the evolution of the estimates over the last six revision rounds since 2001. The revision cycles of the most recent estimates (2007-2009) are not yet completed for the Canadian estimates. Similarly, the 2008 and 2009 estimate of United States GDP will go through at least one more revision cycle. The estimates produced during the first four-year revision cycle appear with the footnote marker "1". Other revisions reflect revisions of the "second" type outlined above.
Table 4 shows the long-term impact of revisions on the labour productivity performance of both Canada and the United States for different sub-periods included in the 1981-to-2009 period. The period from 2000 to 2009 cover the years since the end of the previous peak in productivity growth, which was observed in 2000. The period from 2006 to 2009 correspond to a period when only preliminary estimates of GDP are available. The period from 1981 to 2000 however, contain estimates that are past the preliminary revision cycle. It essentially covers two business cycles and therefore provides a better comparison of differences in long-term trends between Canada and the United States 5 . Productivity estimates of short-term changes are generally more volatile than estimates of changes over the long term.
3.1 Impact of Canadian revisions
Overall, the revisions of the Canadian productivity figures for the period from 2006 to 2009 resulted in almost no change from previous estimates. For the business sector on the whole, the revisions reduced the annual rate of growth in Canada's labour productivity for 2006 and 2007, and increased it for 2008 and 2009. The magnitude of the revisions ranged from a 0.3% upward revision in 2009, to a 0.4% downward revision in 2007.
In general, the revisions tended to cancel each other out. Consequently, the revisions had no impact on the average annual productivity growth for the period from 2006 to 2009, which remains negative (-0.2%).
3.2 Impact of American revisions
On the other hand, the annual growth rate of labour productivity in American businesses was revised downward for each of the last four years, from 2006 to 2009. Over this period, the revised estimates show that average annual productivity increased 2.1%, 0.5 percentage points less than the previously published estimates indicated.
Thus, the average annual rate of productivity in the United States reached 0.9% in 2006 (revised from 1.0%), 1.5% in 2007 (revised from 1.8%), 1.1% in 2008 (revised from 2.1%) and 3.5% in 2009 (revised from 3.8%). Annual productivity growth in the United States slowed gradually between 2002 and 2006, before rebounding slightly in 2007 and 2008 and increasing significantly in 2009.
Since 2002, the United States has systematically revised downwards its preliminary estimates of labour productivity. On average, revisions have reduced productivity growth by -0.8 percentage point on an annual basis.
3.3 Analysis of the gap in labour productivity between Canada and the United States
The average annual productivity growth in American businesses for the period of 2004 to 2007 was 1.4% (compared to 1.5% before revisions), a growth rate comparable to that of Canadian businesses (+1.2%) as shown in table 4.
While the revisions for 2008 and 2009 tended to narrow the gap between the growth in Canadian labour productivity and US labour productivity it is still much wider than for the period 2004 to 2007. The annual US-Canada gap in productivity growth for 2008 narrowed from 3.2 percentage points to 2.0 percentage points for 2008 and from 3.7 points to 3.1 percentage points for 2009. These gaps are mainly due to different trends in hours worked in the two countries.
There was also a substantial difference in average annual productivity growth between Canada and the United States from 2000 to 2004, with productivity in the United States growing five times faster than in Canada.
Between 2000 and 2004, the average annual growth in U.S. productivity was 3.5%. In contrast, it increased by 0.7% a year in Canada.
Over the 2000-to-2009 period, the average annual growth rate was 0.7% in Canada and 2.5% in the United States: Canadian productivity increased at less than one-third of the pace in the United States. Over this period, growth in real GDP was comparable in both countries while hours worked increased at a faster pace in Canada. More precisely, GDP growth in Canada was, on average, 1.4% per year from 2000 to 2009, while the hours worked increased by 0.7%. In comparison, the U.S. GDP grew, on average, by 1.5%, while, during the same period, hours worked decreased by 1.0 %.
Over a longer period (1981 to 2000), there is a small gap in productivity growth between Canada and the United States (0.4 percentage point per year), some of which may arise from slightly different methods used to calculate the growth in labour inputs (Maynard 2007). For this period, productivity has grown at an average annual rate of 1.6% in Canada, compared with 2.0% in the United States.
The 2006-to-2009 revisions of GDP in Canada (and the 2007-to-2009 revisions of GDP in the United States) served to reduce the gap in Canada-US labour productivity in the recent years. The gap for the period 2006-2009 was revised from 2.8 percentage points to 2.3 percentage points. When included in the average for the period 2000 to 2009 the average productivity gap was revised from 2.0 percentage points to 1.8 percentage points.
Since the most recent revisions applied only to the period after 2000, they have had no effect on Canada–United States differences over the period 1981 to 2000. During this period, Statistics Canada's estimates of productivity growth have consistently shown an average annual gap of 0.4 percentage points between Canada and the United States. For a more extensive discussion of the significance of the difference and the causes behind it, see Statistics Canada (2007) and Baldwin, and Gu (2009).
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