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Shifting levels of productivity

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Productivity is about how efficient a business produces goods or services. The better use a company makes of the materials it uses and the people it employs, the more productive it is. And as labour productivity increases, companies produce more with fewer hours worked—improving their competitiveness and their profitability.

Thus, the productivity of a company, industry or even a country can be a key indicator of economic health. And while productivity of Canadian businesses has grown almost every year over the past decade, the 0.6% increase in 2007 was the slowest growth in the three last years, and significantly lower than the peak of 3.5% seen in 2000.

Labour productivity grew slightly faster in Canada’s services sector than in the goods-producing sector in 2007. Wholesale and retail trade accounted for most of the increase among service industries, posting 2.4% and 3.5% jumps, respectively. The financial industry also raised its productivity, by 1.5%.

The utilities industry saw the largest increase in 2007, at 5.3%. Hours worked in manufacturing decreased more than production in 2007, which resulted in a 1.9% gain in manufacturing productivity.

For U.S. businesses, the labour productivity rose 1.9% in 2007. While Canada led the United States in productivity growth in 2005 and 2006, the gap swung back in favour of the United States in 2007, largely because the number of hours worked by Canadians rose faster than those of U.S. workers.

Wages increased at an above-average pace in 2007, and the value of the loonie rose against the U.S. greenback. So, Canada’s unit labour cost—measured by the cost of workers’ wages and benefits per unit of economic output, in U.S. dollars—jumped 9.5%, compared with 3.1% south of the border.