The Conference Board of Canada’s Economist Richard Forbes offers the following insights on today’s Labour Productivity data.
Growth in labour productivity of Canadian businesses increased 0.2 per cent in the third quarter and is up 0.6 per cent compared to a year ago. That is less than half the pace of productivity growth seen in the U.S. over the past year. When you consider that compensation of employees in Canada has nearly matched our southern neighbours during the same period, the weaker productivity growth is concerning for business investment in Canada.
- Labour productivity (as measured by output per hour worked) of Canadian businesses increased 0.2 per cent in the third quarter and is up 0.6 per cent compared to the same period a year ago. That is slightly below the average from the past two decades.
- In the third quarter, hourly compensation rose 1.3 per cent and has risen 4.4 per cent over the past year, consistent with the solid wage gains we have seen in the Canadian economy.
- Unit labour costs rose 1.0 per cent in the third quarter and have risen 3.8 per cent over the past year, which is the strongest year-over-year gain since 2012.
- Comparatively, labour productivity in the U.S. fell 0.1 per cent in the third quarter. However, at 1.5 per cent, labour productivity in the U.S. has risen at more than twice the pace we have seen in Canada over the past year.
- Unit labour costs in the U.S. have increased a slower pace than in Canada in the third quarter (0.9 per cent) and over the past year (3.0 per cent).
- This morning’s labour productivity report signals that Canada’s competitiveness compared to the U.S. has weakened. Unit labour costs are a key driver for investment, particularly within labour-intensive sectors such as services. A weaker pace of unit labour costs is generally more attractive for prospective investors.