DAILY NEWS Dec 7, 2012 3:38 PM - 0 comments

Canada's labour productivity continues to decline

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Ottawa -- The labour productivity of Canadian businesses fell 0.5% in the third quarter of 2012, following a 0.6% decline the previous quarter. It was the second consecutive decrease after three quarterly gains.

The decline in productivity in the third quarter took place in a context where business output remained at the same level as in the previous quarter, while hours worked continued to grow, though at a slower pace than in the previous quarter.

The real gross domestic product of Canadian business was unchanged in the third quarter, following four quarters of growth. Higher production in service-producing businesses was offset by a decline in the output of goods-producing businesses.

At the same time, hours worked in the business sector increased 0.4%, after rising 1.1% the previous quarter. All service industries were up, except retail trade and the information and cultural industries. Employment in businesses edged down 0.1% in the third quarter, while average hours rose 0.5%.

For a second consecutive quarter, productivity declined in both goods-producing and service-producing businesses.

Goods-producing businesses saw a 0.2% decrease in productivity in the third quarter. A decline in productivity for mining and oil and gas extraction (-3.1%) more than offset productivity gains in construction (+1.0%) and manufacturing (+0.5%).

In the service-producing sector, productivity decreased 0.4% in the third quarter, a decline similar to the one observed in the previous quarter. With the exception of retail trade (+0.4%) and the information and cultural industries (+1.9%), productivity was down in every service-producing industry during the quarter. A 1.8% decline in wholesale trade was the main contributor to the sector's downward movement.

In the United States, productivity growth in American businesses reached 0.6% in the third quarter, after advancing 0.4% the previous quarter.

In Canadian businesses, the growth rate of labour costs per unit of production accelerated to 1.3% in the third quarter. This was the highest quarterly growth rate since the first quarter of 2009 when it reached 1.4%.

The increase in the unit labour cost in the third quarter was attributable to the decrease in productivity combined with a faster rate of growth in average compensation per hour worked, which rose from 0.1% in the second quarter to 0.9% in the third quarter. This was the fourth straight quarter in which hourly compensation in Canada grew faster than productivity.

The unit labour costs of Canadian businesses in US dollars rose 2.9% after edging down 0.1% in the previous quarter. It was the second increase in five quarters. The advance was partly because of an average 1.5% increase in the value of the Canadian dollar relative to the US dollar during the quarter.

In comparison, American businesses saw their unit labour costs decline 0.4%, after edging down 0.1% in the second quarter and growing 1.5% in the first quarter.

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