Labour productivity down after zero growth in the second quarter
Labour productivity of Canadian businesses decreased by 1.5% in the third quarter, with hours worked rebounding more quickly than business output.
The decline in labour productivity in the third quarter follows zero growth in the previous quarter, where output and hours worked both fell at a similar pace. While the second quarter was marked largely by the third wave of the COVID-19 pandemic, the third quarter saw a rebound in output and hours worked caused by the reopening of a larger number of businesses, including those considered non-essential.
Since the start of the pandemic, labour productivity has typically fallen when restrictions have been loosened, with hours worked increasing more than output. In recent quarters, it has stabilized and continued to adjust in the third quarter. Compared with the fourth quarter of 2019—the last quarter before the start of the COVID-19 pandemic—productivity edged up 0.4%.
In the third quarter, health restrictions that affected recreation services in particular (e.g., hotels, restaurants, travel) were further relaxed, leading to a rebound in both business output and hours worked. However, growth in hours worked outpaced that of output, leading to a decrease in productivity in the third quarter.
Structural change is the main factor behind the overall decrease in productivity. In the third quarter, the increase in hours worked was much greater in industry sectors with lower value added and, therefore, lower productivity. In particular, industry sectors such as accommodation and food services, and arts, entertainment and recreation had strong growth in hours worked in the third quarter, increasing their relative weight. This reallocation of hours had a negative impact on the overall change in productivity.
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