Labour productivity, hourly compensation and unit labour cost

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Third quarter 2011  (Previous release)

The labour productivity of Canadian businesses rose 0.4% in the third quarter, after declining 1.0% in the second quarter.

Productivity of Canadian businesses rebounds

Productivity of Canadian businesses rebounds

Chart description: Productivity of Canadian businesses rebounds

The third-quarter productivity gain reflected the upturn in business output, which outpaced the growth in hours worked.

Following a 0.4% decrease in the second quarter, the real gross domestic product (GDP) of businesses rose 1.0% in the third quarter. The goods-producing industries contributed the most to the increase, as mining and oil and gas extraction and manufacturing increased their activity. In the second quarter, output in these two industries was disrupted by temporary factors, including the tsunami in Japan and the forest fires in northern Alberta.

Hours worked grew by 0.7%, an increase similar to that observed in each of the last three quarters. Employment and average hours (hours worked per job) also grew at much the same rate as in the previous quarter, registering increases of 0.4% and 0.3% respectively.

In the third quarter, the productivity gain for all businesses combined was attributable to goods-producing businesses, as their productivity was up 0.7%, following a 1.8% decrease in the previous quarter. The main contributors to the increase were mining and oil and gas extraction (+1.7%) and manufacturing (+0.7%).

In services-producing businesses, productivity remained unchanged despite large increases in wholesale trade and in finance and insurance.

In the United States, the productivity of American businesses rose 0.5% in the third quarter, after remaining unchanged in the second quarter and falling 0.3% in the first quarter.

In Canadian businesses, labour costs per unit of production declined 0.5%, following five consecutive quarterly increases.

The decrease in unit labour costs in the third quarter was largely a result of increased productivity, as average compensation per hour worked edged down 0.1%, after remaining unchanged in the previous quarter. In each of the last two quarters, hourly compensation in Canada followed the same pattern as in the United States.

After three quarters of appreciation, the average value of the Canadian dollar relative to the American dollar was down 1.3% in the third quarter. With this depreciation, Canadian unit labour costs expressed in US dollars fell 1.7% in the third quarter, the first decrease in a year. In comparison, American businesses saw their unit labour costs decline 0.6%, after remaining steady in the previous quarter.

The third quarter labour productivity figures released today were revised back to the first quarter of 2008 at the aggregate level and to the first quarter of 1997 at the industry level.

Note: Important changes are coming to Canada's System of National Accounts (CSNA), starting in October 2012. These changes will affect all users of CSNA products and statistics such as gross domestic product (GDP), balance of payments, international investment, and input-output tables. For more information, consult the National Economic Accounts website.

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.

This release incorporates a number of source data revisions: revised GDP by industry released in September; revised Survey of Employment, Payrolls and Hours data, released in March; and the new annual benchmarks for the Economic Accounts labour statistics, published on November 23. In addition, the seasonally adjusted estimates of hours worked and employment by industry were revised using the X-12-ARIMA seasonal adjustment method.

All the growth rates reported in this release are rounded to one decimal place. They are calculated with index numbers rounded to three decimal places, which are now available on CANSIM.

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

Definitions, data sources and methods: survey number 5042.

Additional tables and links to other releases from the national accounts can be found in the third quarter 2011 issue of Canadian Economic Accounts Quarterly Review, Vol. 10, no. 3 (13-010-X, free), available from the Key resource module of our website under Publications. This publication will be updated on December 13, at the time of the release of the National Balance Sheet Accounts.

Labour productivity, hourly compensation and unit labour cost data for the fourth quarter will be released on March 9, 2012.

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.