Canada Labour Productivity Growth Slows

Canadian business labor productivity rose 0.9% quarter-on-quarter in Q3 2025, rebounding from a 1.0% decline in Q2 and beating expectations of 0.4% growth. The increase marked the sixth gain in eight quarters. Real business GDP also rebounded 0.9%, reversing a 0.8% contraction in the previous quarter. Productivity advanced in nine of 16 major industry sectors, led by goods-producing businesses (+1.6%) and modest gains in services (+0.2%). Manufacturing, mining and oil and gas, agriculture, and real estate were the main contributors, while utilities declined for a second consecutive quarter. Overall hours worked in the business sector fell 0.1%, with a 0.6% drop in goods-producing industries more than offsetting a 0.2% rise in services. Wildfires in July and August had a minimal impact, reducing hours by 0.01 percentage point. Unit labour costs rose 0.3%, slowing from 0.8% in Q2, as hourly compensation increased 1.2%.

Canadian business labor productivity fell 1.0% in Q2 2025, following a revised 0.1% fall in Q1 and missing expectations of 0.2% growth. It was the sharpest drop since Q4 2022 (-1.1%), as uncertainty surrounding international trade led businesses to reduce their output for the first time in seven quarters while hours worked continued to increase but at half the pace of the previous quarter. Notable declines were seen in utilities (-4.0%), wholesale trade (-2.6%), and manufacturing (-2.1%), while construction edged down 0.1%. Also, hourly compensation fell 0.5%, its first decline since early 2021, pushing unit labor costs up 0.5%.

Labour productivity of Canadian businesses rose 0.2% in Q1 2025, slowing from a upwardly revised 1.2% in Q4 2024. Still, this marks a second consecutive quarterly gain—the first such streak since the COVID-19 pandemic. The increase was driven by goods-producing industries, where productivity rose 0.8% versus 0.3% in the previous quarter. In contrast, service-producing sectors saw a 0.5% decline after a 1.3% rebound in Q4. Productivity increased in half of the 16 main sectors, led by wholesale trade (2.6%), agriculture and forestry (2.0%), and utilities (1.5%), while real estate posted the sharpest drop (-3.9%). Total hours worked rose 0.4%, rebounding from a 0.5% decline, driven by services. Unit labour costs fell 0.3%, the first drop after four straight quarters of increases.