Labour productivity, hourly compensation and unit labour cost

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The labour productivity of Canadian businesses fell 0.2% in the third quarter, after fluctuating between increases and declines of 0.1% since the second quarter of 2008.

In each of the preceding five quarters, real gross domestic product (GDP) and hours worked declined in tandem, and as a result, there was very little change in productivity during that period.

The real GDP of businesses edged down 0.1% in the third quarter, following sharp quarterly declines in the previous three quarters.

Hours worked (+0.2%) were up in the third quarter for the first time since the first quarter of 2008. Employment and hours worked per job both grew by 0.1%.

The decline in overall business productivity was mainly a result of the goods-producing business sector, which fell 0.9% in the third quarter following a 0.8% drop in the second quarter. Nonetheless, productivity in manufacturing recorded a second consecutive quarterly gain. Meanwhile, productivity in services-producing businesses (+0.2%) continued to climb, though at a much slower pace than in the previous quarter.

Labour costs per unit of production in Canadian dollars edged down 0.1% for Canadian businesses in the third quarter, the first drop since the first quarter of 2002, when it also declined 0.1%. This decrease follows advances of 0.1% in the second quarter and 0.8% in the first quarter of 2009.

The value of the Canadian dollar in relation to its American counterpart rose 6.3% in the third quarter, roughly the same appreciation as in the second quarter (+6.7%). The third quarter appreciation of the Canadian dollar was reflected in a 6.3% advance in the unit labour costs of Canadian businesses in American dollars, a second consecutive quarterly increase. By comparison, American businesses' unit labour costs, which have not risen since the beginning of 2009, shrank by 0.6% in the third quarter.

The labour productivity figures for the third quarter of 2009, released today, were revised back to the first quarter of 2009 at the aggregate level and to the first quarter of 2004 at the industry level.

Note: The term "productivity" in this release refers to labour productivity. For the purposes of this analysis, labour productivity, gross domestic product (GDP) and unit labour cost 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.

This release incorporates a number of source data revisions: revised GDP by industry, released in September 2009; revised Survey of Employment, Payrolls and Hours data, released in March 2009; and the new annual benchmarks for National Accounts labour statistics published on December 11, 2009.

Available on CANSIM: tables 383-0008 and 383-0012.

Definitions, data sources and methods: survey number 5042.

A more comprehensive analysis comparing labour productivity growth in manufacturing between Canada and the United States, as well as additional charts and tables, is now available in the third quarter 2009 issue of Canadian Economic Accounts Quarterly Review, Vol. 8, no. 3 (13-010-X, free), from the Key resource module of our website, under Publications.

A new study Revisions to Canada and United States Annual Estimates of Labour Productivity in the Business Sector, 2005 to 2008 (15-212-X, free), is now available from the Key resource module of our website under Publications.

Fourth quarter data of 2009 for labour productivity, hourly compensation and unit labour cost will be released on March 16, 2010.

For more information, or to enquire about the concepts, methods or data quality of this release contact the information officer (613-951-3640, iead-info-dcrd@statcan.gc.ca), Income and Expenditure Accounts Division.