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Canada’s labour productivity fell by 0.4 per cent in the third quarter, Statistics Canada said on Wednesday, marking the third consecutive quarter of declines.
“Productivity has been a story of serial disappointment in Canada, and the third quarter offered little signs of reversal,” said LJ Valencia, economic analyst at Desjardins Group, in a note. “The outcome coincides with Canada’s lacklustre investment performance during the quarter, as corporate profits fell.”
Corporate income fell by 1.1 per cent during the quarter, according to gross domestic product data released by Statistics Canada last week. Additionally, business investment declined by 11.3 per cent in the same period.
Labour productivity dropped in 11 of the 16 main business sectors tracked by the agency.
Productivity fell by 0.7 per cent in the goods-producing sector and by 0.3 per cent in services. Manufacturing, professional services and wholesale trade were the main contributors to the negative results. Utilities, retail trade, administrative services, and finance and insurance posted increases.
Canada’s productivity has declined in nine of the last 10 quarters. Valencia noted productivity was 4.5 per cent lower than where it was in the fourth quarter of 2019, before the pandemic.
Statistics Canada also noted labour unit costs rose by 1.4 per cent for Canadian businesses.
Shelly Kaushik, an economist with the Bank of Montreal, thinks the rise in labour costs is an opportunity for businesses to invest more in “productivity-enhancing measures.”
“However, elevated labour costs are a headwind for attracting business investment from outside Canada, which is facing an additional drag from the highly uncertain trade environment with the U.S. over the medium term,” she said, in a note to clients.
The United States continued to outpace Canada in terms of productivity, posting a 0.4 per cent gain during the latest quarter.
“While the slack gradually building in the labour market can be expected to dampen wage growth going forward, unit labour costs for many Canadian businesses remain too high to compete with U.S. firms,” said Valencia. “True gains will only come from increased innovation, faster technological adoption, increased competition, and more efficient skills matching.”
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