Canadian business productivity rises in Q4 2023

After seven quarters, Canada's businesses see a 0.4% productivity boost without more work hours

Canadian business productivity rises in Q4 2023

In the fourth quarter of 2023, Canadian businesses witnessed a notable uptick in labour productivity for the first time in seven quarters, registering a 0.4 percent increase.

According to Statistics Canada, this marks a significant shift from the previous trend, with productivity seeing its first rise since the first quarter of 2022, when it increased by 1.0 percent.

Businesses achieved this growth in productivity without increasing the hours worked, highlighting an improvement in efficiency that resulted in higher output in the fourth quarter.

The real GDP of businesses also reflected this positive change, rebounding by 0.4 percent in the fourth quarter after a decrease of 0.4 percent in the preceding quarter.

Concurrently, hours worked in the business sector remained stable, showing slight change from the previous quarter. This stability was mirrored in both the slight decrease in the number of jobs, by 0.1 percent, and a slight increase in average hours worked, by 0.1 percent.

Specifically, in the fourth quarter, there were minor adjustments in hours worked across different sectors, with goods-producing businesses seeing a 0.1 percent increase and service-producing businesses experiencing a 0.1 percent decrease.

Out of the 16 industry sectors, 7 posted increases in hours worked, while sectors such as real estate services and professional services saw virtually no change.

Productivity enhancements were observed across the board, with service-producing businesses recording a 0.4 percent rise in productivity—marking their first increase in six quarters, significantly attributed to the retail trade sector.

Goods-producing businesses also saw a slight improvement in productivity by 0.1 percent, following four quarters of decline. In total, productivity was up in 7 of the 16 main industry sectors and remained unchanged in four sectors: manufacturing, finance and insurance, professional services, and administrative services.

A noteworthy development in the fourth quarter was the decline in unit labour costs, which decreased by 0.1 percent—the first decline witnessed in 13 quarters.

This decrease indicates that the growth in hourly compensation was slower than the increase in productivity, leading to a reduction in the cost of wages and benefits paid by businesses per unit of output.

Reviewing the annual averages for 2023, labour productivity of Canadian businesses declined by 1.8 percent, marking the third consecutive year of decline.

This yearly decrease reflects a modest 0.6 percent increase in real GDP of businesses combined with a 2.5 percent rise in hours worked, indicating a slowdown in both business output and hours worked for the second consecutive year.

The productivity downturn in 2023 was predominantly observed in goods-producing businesses, which fell by 3.4 percent for the third consecutive year. Conversely, productivity in service-producing businesses decreased by 0.8 percent, following a year of no growth.