MRO Magazine

Canadian labour productivity continues slow uptick

Ottawa, ON – The labour productivity of Canadian businesses rose 0.7% in the fourth quarter of 2011, similar to the gain observed in the third quarter (+0.6%), reports Statistics Canada.


Ottawa, ON – The labour productivity of Canadian businesses rose 0.7% in the fourth quarter of 2011, similar to the gain observed in the third quarter (+0.6%), reports Statistics Canada.

The fourth-quarter increase in productivity occurred in a context where business output continued to grow, albeit at a slower pace than in the previous quarter, while hours worked declined for the first time in five quarters.

The growth of the real gross domestic product (GDP) of businesses was 0.5% in the fourth quarter, less than half the growth rate in the previous quarter (+1.2%). The main factor moderating fourth-quarter output was a slowdown in mining and oil and gas extraction, wholesale trade, construction, and finance and insurance services.

At the same time, hours worked in businesses decreased 0.2%, after rising in the previous four quarters. Construction, wholesale trade, and professional, scientific and technical services were primarily responsible for the decline.

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Both goods-producing and services-producing businesses contributed to the overall productivity gain in the fourth quarter. The productivity of goods-producing businesses was up 1.1%, its second consecutive quarterly increase, largely a result of gains in manufacturing and construction.

Productivity in the services-producing industries grew 0.5%, following two consecutive quarterly declines. Professional, scientific and technical services, retail trade, and other services were the main contributors to the increase.

For 2011 as a whole, business productivity was up 0.8%, after rising 1.5% in 2010. In comparison, a slight fourth-quarter increase of 0.2% in the United States resulted in the annual growth of productivity in American businesses being 0.2% for 2011, down from 4.0% in 2010. This is the first time since 2006 that productivity has grown faster in Canada than in the United States.

The 2011 difference in productivity between Canada and the United States was mostly the result of a difference in the growth in real GDP of businesses, since the two countries had similar increases in hours worked. Although it slowed in both countries in 2011, real GDP growth was higher in Canadian businesses (+2.6%) than in American businesses (+2.2%).

In Canadian businesses, labour costs per unit of production rose 0.8% in the fourth quarter, after declining 0.6% in the previous quarter. The fourth-quarter increase occurred because average compensation per hour worked (+1.5%) grew more than twice as fast as productivity. In the previous two quarters, average hourly compensation in Canada was almost unchanged.

However, the Canadian dollar was down an average of 4.2% in relation to the US dollar. As a result, Canadian businesses’ unit labour costs in US dollars fell 3.4% in the fourth quarter, their second consecutive quarterly decline. By comparison, American businesses’ unit labour costs were up 0.7% in the fourth quarter.

For 2011 as a whole, the growth of labour costs per unit of production in American businesses (+2.3%) outpaced that of Canadian businesses (+2.1%), the first time this has occurred since 2006.

The labour productivity figures for the fourth quarter, released today, were revised back to the first quarter of 2011.

Note: 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.