MRO Magazine

Labour productivity declined in fourth quarter of 2008

Ottawa, ON -- The labour productivity of Canadian businesses fell 0.5% in the fourth quarter of 2008, extending the...

Human Resources

March 18, 2009
By MRO Magazine

Ottawa, ON — The labour productivity of Canadian businesses fell 0.5% in the fourth quarter of 2008, extending the period of weakness in the business sector that began in the second quarter of 2007, according to a new report from Statistics Canada.


In the fourth quarter, productivity declined as output dropped more rapidly than hours worked.



The real gross domestic product (GDP) of Canadian businesses shrank by 1.3% in the fourth quarter, reflecting weak domestic demand and the continuing slump in exports. This was the largest decline since the first quarter of 1991, when business sector GDP declined 2.2%.


At the same time, hours worked fell 0.8% in the fourth quarter of 2008 after remaining virtually unchanged in the previous two quarters.


The majority of industries experienced a drop in productivity in the fourth quarter. Wholesale trade, manufacturing and finance, insurance and real estate accounted for much of the decline.


In the United States, productivity in the business sector edged down 0.1% in the fourth quarter. It was the first quarterly decrease since the fourth quarter of 2007.


Labour costs per unit of production in Canadian dollars rose by 1.6% for Canadian businesses in the fourth quarter. This was just over twice the rate registered in the previous quarter (+0.7%).


The rise reflected the quarterly increase of 1.1% in hourly compensation, combined with the decline in productivity. In the first three quarters of 2008, the average quarterly growth rate of hourly compensation in Canada was 0.9%.


In the fourth quarter, the Canadian dollar depreciated by 14.1% relative to its American counterpart. Canadian unit labour costs measured in US dollars decreased substantially due to this depreciation.


Businesses in the Unites States saw their unit labour costs climb 1.3% in the fourth quarter, up from the growth rate of 0.8% for the previous quarter.


Annual 2008 results


For 2008 as a whole, labour productivity in the Canadian business sector fell 1.1%. It was the first annual decline since 1996.


In 2008, the production of goods and services by Canadian businesses fell by 0.3%. At the same time, hours worked continued to rise, albeit at only half the rate of the previous two years.


Despite a slight decrease in the fourth quarter, productivity in American businesses grew 2.7% for 2008 as a whole, appreciably higher than the annual rates for the previous three years.


This occurred in a context marked by a gradual slowdown in the annual growth rate of GDP in the United States that began in 2005, and the first annual decrease in hours worked in five years.