Canada. Labour Productivity of Businesses remain Unchanged

The labour productivity of Canadian businesses did not change in the second quarter, marking the fifth consecutive quarter with little variation.

Unit labour cost increased 0.3% in the second quarter, a deceleration from the increases of 0.8% in the first quarter and 1.7% in the fourth quarter of 2008.

Since the second quarter of 2008, the real gross domestic product (GDP) of Canadian businesses has changed at roughly the same pace as hours worked, resulting in little change in productivity over the last five quarters. During that period, real GDP and hours worked both declined by 4.9% cumulatively.

Output and hours worked both fell 1.3% in the second quarter of 2009, after dropping 2.1% in the first quarter of the year.

A slight upturn in domestic demand led to an increase in output and productivity in the services-producing industries, which offset a decline in the goods-producing industries.

An upswing in wholesale and retail trade and the financial industries in the second quarter boosted the service sector's productivity by 0.6%, while the goods sector posted a 0.5% decline. After falling sharply in the previous two quarters, manufacturing productivity was almost unchanged, edging down 0.1% in the second quarter.

Hours worked in the goods sector fell 3.2%, a fourth consecutive quarterly decrease. Hours worked also shrank in service industries for a fifth straight quarter, but the rate of decline was much lower than in goods. Service sector hours were down 0.5% in the second quarter, much the same pace as in the previous two quarters.

The labour productivity of American businesses rose 1.6 % in the second quarter, its largest gain in six years. In the previous three quarters, productivity followed essentially the same pattern in the United States as in Canada.

Labour costs per unit of production in Canadian dollars were up 0.3% for Canada in the second quarter, their smallest increase since the second quarter of 2007.

With little change in productivity in the last five quarters, increases in unit labour costs have essentially reflected the advance in hourly compensation.

After five consecutive quarters of depreciation, the Canadian dollar rose 6.7% in value against its US counterpart in the second quarter. That translated into a 7.0% increase in Canadian unit labour costs expressed in American dollars, the first quarterly increase since the second quarter of 2008. In comparison, unit labour costs in American businesses were down 1.5% in the second quarter, their largest drop in nine years.

The labour productivity data for the second quarter of 2009, released today, have been revised back to the first quarter of 2009.

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