Canadian Business Labor Productivity Declines in Q4 2025

Canadian business labor productivity declined 0.1% quarter-on-quarter in Q4 2025, following a 1.1% increase in the prior quarter and matching forecasts. This marked the second quarterly decline in the last nine quarters. Hours worked in the business sector edged down 0.1% in the fourth quarter, after falling 0.2% in the third quarter, a slower pace than the 0.2% contraction in real gross domestic product. Goods-producing businesses drove the overall productivity decline, with manufacturing and construction being the main contributors. As labor productivity edged down, the 0.5% rise in hourly compensation led to a 0.7% increase in unit labor costs for businesses. For the full year of 2025, labor productivity was up 1.1%, supported by strong growth in the third quarter.

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%.