‘A whole economy issue’: Labour productivity declines for second straight quarter

financialpost.com:

Labour productivity at Canadian businesses fell by 0.2 per cent during the second quarter of 2024, with 11 of the 16 main industries recording declines, Statistics Canada said on Thursday.

Productivity has now declined for two consecutive quarters, after a 0.3 per cent drop in the first quarter of this year. At an annual rate, productivity fell by 0.7 per cent.

The results build on a worrying trend of declining labour productivity, an important driver for disposable income and standard of living for Canadians, economists said.

“This is not a problem confined to one region or sector — say manufacturing. It is a whole economy issue,” said Douglas Porter, chief economist at Bank of Montreal, in a note to clients. “And while it may seem like an esoteric topic for many, the reality is that unless it is properly addressed, Canada’s relative standard of living will continue to weaken.”

Hours worked in the business sector increased by 0.6 per cent in the second quarter, driven by an increase in the number of jobs, however the growth of output did not keep pace.

The service-producing sector was the main contributor to the quarterly decrease, with information and cultural industries (-2.1 per cent), real estate services (-1.5 per cent) and professional services (-0.9 per cent) showing declines.

Pedro Antunes, chief economist at the Conference Board of Canada, said it’s important to look at productivity before the pandemic, prior to disruptions that skew the data.

Antunes says Canada’s productivity overall has declined 0.5 per cent compared to the average in 2019 and Canada has been a laggard for decades.

“It’s not just this decline since 2019,” said Antunes. “It’s the fact that we’ve been lagging in our productivity growth for a