Labour productivity, hourly compensation and unit labour cost, fourth quarter 2016
Fourth quarter 2016
Labour productivity growth slows in the fourth quarter
Labour productivity of Canadian businesses rose 0.4% in the fourth quarter, following a 1.2% gain in the third quarter.
Despite slower growth in business output in the fourth quarter, hours worked rebounded slightly after two consecutive quarterly declines.
Real gross domestic product (GDP) of businesses grew 0.7% in the fourth quarter, down slightly from the 1.1% gain the previous quarter. The increase for service-producing businesses (+0.6%) was similar to the previous quarter, while goods-producing businesses (+0.8%) continued to increase production, but at a considerably slower pace, especially in manufacturing and mining and oil and gas extraction.
During this time, the hours worked to produce goods and services in the business sector rose 0.4%, after declining the previous two quarters. This was the largest increase since the third quarter of 2015 (+0.7%).
Hours worked in service-producing businesses increased 0.5% in the fourth quarter, mainly as a result of gains in finance and insurance (+1.2%), professional services (+2.5%) and administrative services (+2.1%). Hours worked in goods-producing businesses were virtually unchanged (+0.1%). Increases in mining and oil and gas extraction (+0.4%) and in manufacturing (+0.5%) more than offset the decline in agriculture and forestry (-2.1%).
Productivity growth in the fourth quarter was mainly attributable to goods-producing businesses (+0.7%), following a marked 2.7% gain the previous quarter. Productivity in service-producing businesses edged up 0.1%, following a 0.5% gain in the third quarter.
Mining and oil and gas extraction (+2.9%) was the main source of productivity growth for a second consecutive quarter. Wholesale trade (+2.1%), retail trade (+1.1%), construction (+0.6%), arts and entertainment (+3.8%) and agriculture (+1.9%) also contributed positively to productivity growth in the fourth quarter.
In the United States, labour productivity of businesses rose 0.5% in the fourth quarter, half the rate posted in the previous quarter. As in the previous quarter, US productivity growth mainly reflected an increase in real GDP of businesses (+0.5%), while hours worked remained virtually unchanged.
Unit labour costs increase after declining in the third quarter
The labour cost per unit of output for Canadian businesses increased 0.7% in the fourth quarter, after decreasing 0.9% in the third quarter.
This reflected a 1.0% increase in the average compensation per hour worked, considerably greater than the increase in productivity.
Growth in hourly compensation increased at a similar pace in goods-producing businesses (+1.0%) and service-producing businesses (+1.1%) in the fourth quarter. Hourly compensation was up in every major industrial sector except professional services (-0.3%) and administrative services (-1.4%).
The average value of the Canadian dollar relative to the US dollar declined for a second consecutive quarter, down 2.1%. As a result, unit labour costs in US dollars for Canadian businesses fell 1.5%, a second straight quarterly decline.
By comparison, unit labour costs of American businesses rose 0.4% in the fourth quarter, after posting zero growth in the previous quarter.
For 2016 as a whole, labour productivity of Canadian businesses increased 0.7%. The annual increase followed a 0.5% decline the previous year and gains of 2.6% in 2014 and 1.6% in 2013.
Real GDP of businesses (+1.2%) grew more quickly in 2016 than in 2015 (+0.6%), while hours worked (+0.5%) increased at a slower pace than in 2015 (+1.2%).
Productivity grew at a similar pace in goods-producing businesses (+0.7%) and service-producing businesses (+0.8%). Mining and oil and gas extraction (+10.8%), agriculture (+7.9%), transportation and warehousing services (+3.5%), wholesale trade (+2.5%), real estate services (+2.4%), finance and insurance (+2.0%) and manufacturing (+1.5%) all contributed to annual productivity growth in 2016.
By comparison, productivity of American businesses edged up 0.3% in 2016, the lowest annual growth since 2011. It was the sixth year in a row that annual productivity growth in the United States has been below 1.0%.
Expressed in US dollars at the average exchange rate, unit labour costs in Canadian businesses fell 2.7% in 2016. By contrast, unit labour costs in American businesses rose 2.5%, the largest annual increase since 2007 (+2.9%).
Business sector: Labour productivity and related variables for Canada and the United States – Seasonally adjusted
Note to readers
With this release on labour productivity and related measures, data were revised back to the first quarter of 2013 at the aggregate and industry levels. These revisions are consistent with those incorporated in the annual data on provincial and territorial labour productivity and related measures, published on February 10, 2017.
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.
All necessary basic variables for productivity analyses (such as hours worked, employment, output and compensation) are seasonally adjusted. For information on seasonal adjustment, see Seasonally adjusted data – Frequently asked questions.
Labour productivity, hourly compensation and unit labour cost data for the first quarter will be released on June 2.
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.
The Methodological Guide: Canadian System of Macroeconomic Accounts (13-607-X) is available.
The User Guide: Canadian System of Macroeconomic Accounts (13-606-G) is also available. This publication will be updated to maintain its relevance.
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