Canada’s productivity has been declining. Why that’s a problem for the economy

globalnews.ca:

Canadians feeling like they weren’t as productive as they could’ve been in 2023 can take solace. Neither was Canada’s economy.

Labour productivity — a broad measure of real gross domestic product by hours worked across the economy — has declined nationally in six consecutive quarters, Statistics Canada said last month.

Economists who spoke with Global News say this metric is critical for improving Canadian quality of life, and recent declines will be particularly worrying to the Bank of Canada as it gauges where to set its benchmark interest rate next.

“What it really boils down to is a sense that if we are able to generate more income with each hour worked, then we’re better off for it,” says Pedro Antunes, chief economist at the Conference Board of Canada.

Canada is in the middle of the pack of countries in the Organisation for Economic Co-operation and Development (OECD) when it comes to productivity, according to a November analysis from BMO chief economist Doug Porter.

While the country outperforms Mexico and Spain on labour productivity, Canada trails the United States and a swath of Scandinavian nations by a fair margin. Porter notes that while OECD figures only go up to 2021, Canada’s productivity has only fallen since then.

Rising productivity allows a workforce to do more with the same or even fewer resources, which fuels growth in wages, the tax base and the general wealth of a nation. This key metric also has a bearing on inflation, and it’s something the Bank of Canada has flagged that it’s watching closely.

Though the central bank has held its benchmark interest rate steady in its last three decisions, amid signs of slowing in the economy, one of the areas it’s tracking in gauging where inflation is heading