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Labour productivity, hourly compensation and unit labour cost
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The labour productivity of Canadian businesses rose 0.2% in the third quarter, the same growth rate as that recorded in the previous quarter. This pace remains below that of the first three months of 2007, which saw growth of 0.6%.
Meanwhile, productivity growth in the United States climbed sharply to 1.6% in the third quarter, due mainly to a substantial growth in production.
In the third quarter, the services sector was solely responsible for the overall rise in productivity of Canadian businesses, while productivity in the goods sector fell. In particular, productivity in manufacturing declined for the first time since the third quarter of 2006.
The modest productivity performance in the third quarter, combined with the strength of the Canadian dollar, again drove up the unit cost of Canadian labour expressed in US dollars, although to a lesser degree than in the second quarter. This continued to have a negative impact on the competitiveness of Canadian businesses compared with their US counterparts.
Manufacturing sector: production drops as hours worked also decline
In the manufacturing sector, productivity decreased by 0.6% in the third quarter. This was the first decline after three straight quarters of growth.
Hours worked in manufacturing decreased 0.1% in the third quarter, the sixth straight quarter of decline, reflecting continued adjustment in this sector. Meanwhile, production in manufacturing declined 0.7% in the third quarter after two straight quarterly increases.
Note to readersThis release contains a brief analysis of detailed data on labour productivity growth and other related variables. A more thorough analysis, including additional charts and tables, is available in the Canadian Economic Accounts Quarterly Review. The term "productivity" herein refers to labour productivity. Calculations of the productivity growth rate and its related variables are based on index numbers rounded to one decimal place. For more information about the productivity program, see the National Economic Accounts module accessible from the home page of our website. You can also order a copy of a technical note on the quarterly estimates of productivity by contacting Client Services (productivity.measures@statcan.gc.ca). Revisions This release incorporates revised estimates of labour productivity and associated variables based on revisions to source data. The Survey of Employment, Payrolls and Hours (SEPH) published revised employment estimates from 2001 on March 30, 2007. Revisions to gross domestic product by industry from 2002 to 2006 were released on October 31, 2007. New annual benchmarks for hours worked were released on November 27, 2007. As a result of these revisions, estimates have been revised back to the first quarter of 2007 at the aggregate level and to the first quarter of 1997 at the industry level. In addition, indexes of labour productivity and the related variables have been converted from reference year 1997 to reference year 2002. This change affects data from the first quarter 1981 to the present. Adoption of the new 2002 reference year does not alter productivity growth rates since it represents a scaling of indices based on 1997. |
Manufacturing output continued to be hampered by the sharp appreciation of the Canadian dollar. Manufacturers had to cope with a 4.9% appreciation of the Canadian dollar against its US counterpart in the third quarter, following a 6.3% appreciation in the second quarter.
Productivity growth remains moderate in Canada while accelerating sharply in the United States
While the gross domestic product (GDP) in Canada rose slightly less in the third quarter than in the second, the growth in GDP in the United States accelerated sharply in the third quarter.
After posting the same rate in the second quarter in both countries (+1.0%), GDP in the United States rose at a pace almost twice that of Canada. In the third quarter, GDP growth in Canadian businesses was up 0.8% compared with a strong gain of 1.4% in the United States.
In the United States, productivity climbed sharply to 1.6% in the third quarter, a clear improvement over the 0.9% increase in the second quarter, which followed almost no improvement (+0.1%) in the first three months of the year. This is the best performance since the third quarter of 2003 (+2.3%).
The gap in productivity growth between Canada and the United States also stems from differences in labour market performance.
Hours worked devoted to production in Canadian businesses grew 0.6% in the third quarter, slightly less than the 0.7% rise recorded in the previous quarter. Full-time work was the main component in the increase in hours worked in the third quarter.
By comparison, hours worked in American companies edged down 0.2% in the third quarter after increasing by 0.2% in the second quarter. This is the first decline after 16 straight quarters of either increases or stability. The pace of growth in hours worked has been slowing gradually since the third quarter of 2006.
Unit labour cost continues to slow
Labour cost per unit of production, a measure of inflationary pressures from wages, slowed in Canadian businesses in the third quarter, rising only 0.3% compared with the 0.7% posted in the previous quarter. This has been gradually slowing down since the fourth quarter of 2006.
This situation reflects a slowdown in the growth in hourly compensation from the second quarter, given the small gains in productivity posted in the last two quarters. In the previous four quarters, hourly compensation in Canada had experienced quarterly increases of 0.9% or higher.
For US businesses, labour cost per unit of production fell 0.5% in the third quarter after posting a small decrease of 0.2% in the previous quarter. In these past two quarters, the increase in hourly compensation was less than that of productivity, thereby creating a second straight quarterly reduction in unit labour cost in the United States.
In light of the strong rise in the Canadian dollar in the third quarter, the growth in Canada's unit labour cost expressed in US dollars was up 5.4% in the quarter, following a sharp increase of 7.4% in the second quarter.
Available on CANSIM: tables 383-0008 and 383-0012.
Definitions, data sources and methods: survey number 5042.
A more comprehensive analysis, including additional charts and tables, can be found in the third quarter 2007 issue of Canadian Economic Accounts Quarterly Review, Vol. 6, no. 3 (13-010-XWE, free), now available from the Publications module of our website.
Fourth quarter 2007 data for Labour productivity, hourly compensation and unit labour cost will be released on March 14, 2008.
To order data, contact Client Services (productivity.measures@statcan.gc.ca). For more information, or to enquire about the concepts, methods or data quality of this release, contact Jean-Pierre Maynard (613-951-3654; fax: 613-951-3618; maynard@statcan.gc.ca), Income and Expenditure Accounts Division.
Table(s).
