Whole-year and fourth quarter stats show improvement
Productivity is frequently highlighted as a barrier to the Canadian economy reaching its full potential, so any improvement is to be welcomed.
The latest official data shows that 2024 showed an increase in labour productivity of businesses, snapping a three-year trend of weakening. Statistics Canada says that productivity grew by 0.6% for the whole of 2024 and by the same percentage in the fourth quarter.
The rise in the final three months of last year was at the fastest pace in a year and were twice the pace of the previous quarter. The hours worked to achieve productivity growth increased too, but at half the rate of the previous quarter, leading to the gain for productivity.
StatCan’s figures also show a 0.8% rise in real GDP in the fourth quarter, double the pace of the third quarter.
Canada’s services sector did the heavy lifting for productivity in Q4 2024, with a record 0.6% growth in productivity, seen broadly across industries with the exception of accommodation and food services (-1.3%) and administrative services (-0.3%).
Most goods-producing industries declined though, but at 0.4% in the fourth quarter compared to a decline of 0.6% in the third quarter. The outlier was agriculture and forestry which posted a quarterly increase in labour productivity of 1.6%.
Across goods and services, 10 of the 16 main industry groups improved productivity.
Working harder
While Canadians overall were working harder in the fourth quarter, with hours worked up 0.2%, this was a far slower pace than the 0.4% of the third quarter and 0.5% of the second. And the gain in Q4 was due to a 0.5% rise in the number of jobs while the average hours worked was actually down 0.3%. The goods producers were the driver of this while there was little change in the services sector.
Businesses also saw the cost of labour decrease in Q4. The cost to produce one unit of output increased at the lowest pace in a year, at 0.2% compared to 0.8% in the third quarter. Hourly compensation continued to grow at a pace comparable to that of the previous two quarters.
With productivity up 0.6% in 2024, the 4.3% increase in hourly compensation during the year resulted in a 3.7% growth in unit labour costs of businesses, but this was the lowest annual growth rate for unit labour costs in four years.
