Canadian labour productivity fell a slight 0.2% in the first quarter compared with the fourth quarter of 2002, Statistics Canada reported Thursday.

This was the third consecutive decline after six quarters in which labour productivity either increased or remained stable. This represents the longest series of declines since the recession in the early 1990s.

The first quarter results were weaker than expected, and they highlight a long-term economic disadvantage relative to the United States.

“While higher productivity is the only sure way to raise standards of living in the long term (and thus this number is somewhat disappointing), there is a short-term trade-off between working harder and working longer. Canada has been living this trade-off in the past two years,” says RBC Financial.

“Canadian employment has surged in that period, boosting the number of hours worked in the economy (working longer) leading to higher output and income. The United States has also seen income growth in part of that period, but it has come amid widespread job losses,” notes RBC. “With fewer hours worked, the U.S. is producing more output with less inputs (working harder).”

RBC says that, in the past six quarters, productivity has on average expanded at over a 4% annual rate in the U.S. but barely at all in Canada. “If this gap persists it will have negative long-term implications. Already, US businesses saw their unit costs increase relative to their Canadian competitors in the first quarter due to the 5.3% rise in the Canadian dollar and the drop in Canadian output per hour worked (which leads to higher unit labour costs). Measured in American dollars, unit labour costs rose dramatically by 7.8% in Canada, compared with only 0.9% in the United States in the first quarter on an annual basis. Over time, lower productivity will do much more harm to our competitive position than a higher currency.”