Productivity falls for the fifth consecutive quarter
Labour productivity of Canadian businesses is a key contributor to GDP and it fell by 0.6% in the second quarter, extending the string of declines observed since the second quarter of 2022. The decline observed in the second quarter of 2023 occurred within a quarter marked by a slowdown in business output and growth in hours worked.
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Business output and growth in hours worked slowed sharply in the second quarter
After rebounding in the previous quarter, business output contracted slightly in the second quarter, while growth in hours worked continued, albeit more moderately.
Over the past three quarters, the real gross domestic product (GDP) of businesses moved in a sawtooth pattern. After declining 0.4% in the fourth quarter of 2022, the real GDP of businesses rebounded by 0.6% in the first quarter of 2023 and then declined 0.2% in the second quarter, mainly due to a decline in activity in the wholesale and retail sectors.
Growth in hours worked slows considerably in the second quarter
Growth in hours worked in the business sector decelerated considerably to 0.4% in the second quarter, as a result of the slowdown observed in 12 of the 16 industry sectors.
This slower pace of growth in hours worked reflected the 0.4% increase in the average hours worked, while the number of jobs was unchanged.
Floods and wildfires affected certain economic regions across Canada during the April to June 2023 period. This contributed to a 0.04% reduction in the quarterly change in hours worked in the business sector.
Floods and wildfires in certain economic regions across the country from April to June: Impact on hours worked
Data on lost work hours and overtime due to the floods and wildfires, which affected certain economic regions of the country from April to June, are taken from questions added to the June Labour Force Survey (LFS) (for the reference periods of April and May) and in the July LFS (for the reference period of June).
In the business sector, considering only active workers or those on paid leave, about 4.6 million hours of work were lost during the April to June period, while 2.2 million hours of overtime were worked. As a result, for the second quarter, the net effect of these events on hours worked in the business sector was a loss of 2.4 million hours.
Among all the main industry sectors, it was the mining and oil and gas extraction sector (-716,000 hours) that posted the largest net loss of hours.
Services-producing businesses contribute the most to the overall decline in productivity
Productivity decreased in both services- and goods-producing businesses, with 9 of the 16 industry sectors posting declines in the second quarter.
Productivity of services-producing businesses fell 0.6%, slightly more than in the previous quarter (-0.4%). On the goods side, productivity edged down 0.2% in the second quarter, the third consecutive quarterly decline.
Growth in unit labour costs accelerates again
Unit labour costs—that is, the costs of labour per unit of output—of Canadian businesses continued to accelerate, reaching 2.1% in the second quarter. This was the highest quarterly growth rate since the first quarter of 2022 (+2.9%).
This accelerated pace of growth in unit labour costs reflected the acceleration in hourly compensation growth (+1.5%), resulting from the slowdown in hours worked.
Sustainable development goals
On January 1, 2016, the world officially began implementing the 2030 Agenda for Sustainable Development—the United Nations’ transformative plan of action that addresses urgent global challenges over the following 15 years. The plan is based on 17 specific sustainable development goals.
Note to readers
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 GDP per hour worked.
Unit labour cost is defined as the cost of workers’ wages and benefits per unit of real GDP.
The approach to measuring real output in the business sector differs from the one that is used in the estimates by industry. For the business sector, output is measured using the expenditure-based GDP approach at market prices. This approach is similar to that used for the quarterly measures of productivity in the United States. However, output by industry is based on the value added at basic prices.
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.
