Labour Productivity Rises 0.4% in Q1

 

 

 

June 14 2016

Labour productivity of Canadian businesses rose 0.4% in the first quarter, following no growth in the fourth quarter. This was the largest increase since the fourth quarter of 2014.

The productivity gain in the first quarter accounted for two-thirds of the output growth of businesses, while growth in hours worked accounted for the remaining third. Output and hours worked were essentially flat in the fourth quarter.

Chart 1: Real gross domestic product of businesses increases 3x faster than hours worked

Real gross domestic product (GDP) of businesses increased 0.6% in the first quarter, after a flat fourth quarter. In the first quarter, output of service-producing businesses (+0.6%) increased at a rate similar to the previous three quarters, while output of goods-producing businesses (+0.2%) resumed growth after a decline in the fourth quarter.

Hours worked in the business sector increased 0.2% in the first quarter, and were virtually unchanged in the previous quarter. Hours worked in goods-producing businesses rose 0.5% in the first quarter, while hours worked in service-producing businesses edged up 0.1%. Utilities, arts, entertainment and recreation, and construction posted the highest gains.

First quarter productivity gains in the business sector were attributable to service-producing businesses (+0.5%). Transportation and warehousing (+2.7%), retail trade (+1.1%), and finance and insurance (+1.1%) were the largest contributors to the gain.

Goods-producing businesses posted a 0.3% decrease in productivity in the first quarter, mainly as a result of sharp decreases in construction (-2.7%) and utilities (-2.5%). However, productivity was up in mining, quarrying, and oil and gas extraction (+3.8%) and manufacturing (+1.0%).

In the United States, the labour productivity of businesses fell 0.3% in the first quarter, after decreasing 0.5% in the previous quarter. This was the second time in six quarters that US productivity declined for two consecutive quarters. In the first quarter, real GDP of American businesses edged up 0.1%, after advancing 0.4% in the previous quarter. Hours worked (+0.4%) continued to increase, but at half the pace of the previous quarter.

Unit labour costs decline
For Canadian businesses, productivity growth (+0.4%) was greater than growth in average compensation per hour worked (+0.1%) in the first quarter. Consequently, labour cost per unit of output in Canadian businesses was down 0.3% in the first quarter, after a 0.9% increase the previous quarter.

The gain in hourly compensation in service-producing businesses (+0.5%) more than offset the decrease in hourly compensation in goods-producing businesses (-0.8%). Construction, manufacturing and utilities were the main sectors posting declines in the first quarter.

In U.S. dollars, the unit labour costs of Canadian businesses declined 3.2% in the first quarter, down for a third straight quarter. Most of these declines were due to the depreciation of the average value of the Canadian dollar relative to the U.S. dollar over the same period. In the first quarter, the Canadian dollar fell 2.9%, following declines in the third quarter (-6.0%) and fourth quarter (-2.0%) of 2015.

By comparison, the unit labour costs of American businesses rose 1.0%, after increasing 0.6% in the previous quarter.

Source: Statistics Canada, http://www.statcan.gc.ca/daily-quotidien/160603/dq160603b-eng.htm.