Labour productivity fell once again in the first quarter, according to Statistics Canada.
The first quarter’s 0.5% drop in productivity was in line with the previous quarter’s 0.6% decline. As a result, labour productivity is now 1.3% below its pre-pandemic level, StatsCan said.
Some of the recent weakness in productivity reflects the effect of the pandemic on the economy.
StatsCan noted that public health measures were tightened in the early part of first quarter in response to the omicron variant of Covid-19, which affected both economic activity and the labour market throughout the quarter.
“Business output growth slowed in the first quarter. At the same time, growth in hours worked also decelerated, but continued to outpace growth in business output, resulting in a decline in productivity,” the agency said.
In particular, output growth slowed in the services sector, which was particularly affected by the pandemic restrictions, StatsCan noted.
At the same time, the growth in hours worked slowed from 2.6% in the fourth quarter of 2021 to 1.4% in the first quarter.
Yet, hours worked still exceeded their pre-pandemic level for the first time in Q1, StatsCan said.
Overall, productivity was down in nine of the 16 industry sectors tracked by StatsCan, with the largest declines coming in mining, oil and gas extraction, and wholesale trade.
In a report, BMO Economics indicated that the weak productivity is a concern: “Without productivity growth, the economic pie does not grow.”
The report also stated that “in Canada, population growth has been a big support for GDP growth, especially over the past decade, to some extent masking the weakness in productivity. However, if one looks at GDP growth on a per capita basis, Canada has performed very poorly, reflecting sagging productivity.”
The productivity puzzle represents a long-running challenge for the Canadian economy, the report said.
“What these numbers truly reflect is Canada’s consistently poor performance in incentivizing business investment and broader innovation,” BMO said in its report. “Clearly, a broader rethink of Canada’s productivity performance and competitiveness is in order. If the economic pie isn’t growing, the outlook for the Canadian economy isn’t particularly bright.”