MRO Magazine

Labour productivity takes its first slip in two years

Ottawa, ON -- Labour productivity in the Canadian business sector in the second quarter of 2006 fell by 0.4% betwee...


Human Resources

October 4, 2006
By MRO Magazine

Ottawa, ON — Labour productivity in the Canadian business sector in the second quarter of 2006 fell by 0.4% between April and June, reports Statistics Canada. This is the first time in two years that it has slipped into negative territory. On a year-over-year basis, productivity growth has declined from 2.1% in the first quarter to 1.4% in the second quarter of 2006.

The second-quarter decline in productivity was the direct result of a slowdown in economic activity combined with a more pronounced increase in hours worked. The goods producing industries, which posted a 1.0% decline in labour productivity, were primarily responsible for the overall decline.

In the goods sector, there was a drop in production in the mining and oil and gas extraction sector, which suffered a number of production stoppages due to unforeseen repairs.

In addition, economic activities in the construction sector slowed down dramatically from the first quarter when unseasonably warm weather favoured this industry. Construction grew only 0.4% in the second quarter, a much slower pace than in the previous quarter (+2.4%). Also, manufacturing output has declined in the first two quarters of this year while its labour input has not yet adjusted to this decline.

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However, labour costs per unit of output, a key measure of inflationary pressure on wages, continued to increase at a slow pace in the second quarter, rising 0.3%. Gains in unit labour costs in Canadian businesses have remained modest since the beginning of 2006.

Labour productivity is a measure of real gross domestic product (GDP) per hour worked. Growth in productivity over time serves to improve the population’s standard of living and business competitiveness. Generally speaking, businesses enjoy productivity gains when the growth rate of GDP surpasses the rise in hours of work devoted to production.