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Labour productivity, hourly compensation and unit labour cost, fourth quarter 2014

Released: 2015-03-06

Labour productivity in Canadian businesses edged down 0.1% in the fourth quarter, following a 0.2% gain in the third quarter.

In the fourth quarter, business output increased at roughly the same pace as hours worked.

Chart 1  Chart 1: Labour productivity of Canadian businesses edges down following two quarters of growth - Description and data table
Labour productivity of Canadian businesses edges down following two quarters of growth

Chart 1: Labour productivity of Canadian businesses edges down following two quarters of growth - Description and data table

Real gross domestic product (GDP) of businesses rose 0.6% in the fourth quarter, compared with a growth rate of 1.0% in the third quarter. Most major industries increased their output, while the output of both service-producing and goods-producing businesses grew 0.6%.

Hours worked devoted to production in the business sector rose 0.6% in the fourth quarter, after increasing 0.7% in the third quarter. Hours worked increased by 0.5% in goods-producing businesses and by 0.7% in service-producing businesses. Retail trade, real estate services, construction, agriculture, utilities and other private services were the main contributors to the increase in hours worked by businesses.

Overall productivity growth was relatively unchanged in the fourth quarter, both in goods-producing (+0.1%) and in service-producing businesses (-0.1%). The main increases were in finance and insurance (+2.3%), wholesale trade (+1.3%) and mining, quarrying, oil and gas extraction (+1.0%). By contrast, the main declines were in retail trade (-2.4%), other private services (-1.1%), real estate services (-1.0%) and construction (-0.7%).

In the United States, the labour productivity of businesses fell 0.5% in the fourth quarter, following two consecutive quarterly advances.

Productivity in Canadian businesses decreased at a pace similar to that of hourly compensation (-0.1%) in the fourth quarter. As a result, labour cost per unit of output in Canadian businesses was unchanged. This was the third consecutive quarter in which unit labour costs were relatively unchanged.

When factoring in the 4.0% depreciation of the Canadian dollar relative to the American dollar in the fourth quarter, the unit labour costs of Canadian businesses in American dollars declined 4.1%. This was the first decline in three quarters.

By comparison, American businesses saw their unit labour costs increase 0.7% in the fourth quarter, following two quarterly declines.

Annual 2014

For 2014 as a whole, labour productivity in Canadian businesses rose 2.5%, the largest annual increase since 2005. The productivity growth in 2014 was mainly a reflection of growth in real GDP of businesses.

Productivity increased in both goods-producing businesses (+2.5%) and service-producing businesses (+2.2%). Aside from agriculture and forestry, utilities and construction, productivity in 2014 increased in all major industries.

By comparison, annual productivity growth in American businesses was 0.6%, half the pace of the previous year. In 2013, the productivity of businesses in Canada (+1.1%) increased at a pace similar to that of the United States (+1.2%).

The difference in productivity between Canada and the United States in 2014 was mostly due to different trends in the increase in hours worked, as the two countries had similar increases in real GDP of businesses (+2.9%). For 2014 as a whole, hours worked increased 0.4% in Canada, while they went up 2.3% in the United States.

In Canadian businesses, unit labour costs went up 0.9% in 2014, compared with a 1.3% increase in 2013. The 2014 increase in hourly compensation was greater than the gain in productivity for the fourth consecutive year, at 3.5%.

However, the average value of the Canadian dollar relative to the American dollar registered its largest decrease (-6.7%) in three years. Consequently, in American dollars, the unit labour costs of Canadian businesses fell 5.9% in 2014. By contrast, the unit labour costs of American businesses rose 1.6%.

  Note to readers

Revisions

With this release on labour productivity and related measures, data were revised back to the first quarter of 2014 at the aggregate and industry levels. The recent revisions from the Labour Force Survey (LFS) were taken into account for 2014. The historical revisions of LFS from 2001 to 2013 will be incorporated next fall with the release of the third quarter 2015 data.

Productivity measure

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 gross domestic product (GDP) per hour worked.

Unit labour cost is defined as the cost of workers' wages and benefits per unit of real GDP.

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.

The System of macroeconomic accounts module, accessible from the Browse by key resource module of our website, features an up-to-date portrait of national and provincial economies and their structure.

Links to other releases from the national accounts can be found in the fourth quarter 2014 issue of Canadian Economic Accounts Quarterly Review, Vol. 13, no. 4 (Catalogue number13-010-X). This publication will be updated on March 12, at the time of the release of the national balance sheet and financial flow accounts.

Labour productivity, hourly compensation and unit labour cost data for the first quarter will be released on June 5.

Contact information

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (613-951-4636; mediahotline@statcan.gc.ca).

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