Productivity continues to decline
Labour productivity of Canadian businesses fell 0.5% in the first quarter, a decline similar to the previous quarter (-0.6%).
This was the seventh consecutive quarter decline in productivity, following a record increase in the second quarter of 2020, which was marked by the first lockdown measures in place from mid-March to early May 2020.
In the first quarter of 2022, productivity was 1.3% below its level in the fourth quarter of 2019, the last quarter before the start of the COVID-19 pandemic.
The first quarter of 2022 was marked by the tightening of public health measures in response to the Omicron variant of COVID-19 in most parts of the country in January, and then the easing of these measures in February and March. This affected both economic activity and the labour market throughout the quarter. Thus, 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 in the first quarter.
Business output continues to grow, but at a slower pace than in the previous quarter
Real gross domestic product growth of businesses slowed to 0.9% in the first quarter, down from 2.0% in the previous quarter. With this gain, the output is much closer to its pre-pandemic level (-0.5% compared with the fourth quarter of 2019).
The slowdown in the first quarter was mainly due to the output of service-producing businesses, which rose 0.6% after increasing 2.3% in the fourth quarter of 2021. Output slowed in almost all service industry sectors, due to tightened restrictions on account of the Omicron variant of COVID-19 early in the quarter. In contrast, output continued to rise in goods-producing businesses, increasing 1.8% in the first quarter of 2022 after posting a 1.6% gain in the previous quarter.
The pace of growth in hours worked also slows
The increase in hours worked in the business sector, which reached 2.6% in the previous quarter, slowed to 1.4% in the first quarter. Despite this slowdown, hours worked exceeded their pre-pandemic level for the first time (+0.8% compared with the fourth quarter of 2019). This represents a slightly faster recovery than that of business output.
Hours worked rose at the same pace in both goods-producing businesses (+1.4%) and service-producing businesses (+1.4%) in the first quarter. Overall, all the main industry sectors saw an increase in hours worked, except for accommodation and food services (-1.6%).
For half of the major industry sectors, the recovery in hours worked is not yet complete compared with the fourth quarter of 2019, and the narrowing of gaps between sectors has continued. In total, 7 of the 16 industry sectors have surpassed their pre-pandemic levels, while the manufacturing sector has returned to its pre-pandemic level (+0.0%).
The increase in hours worked in the first quarter reflects a 0.2% increase in employment and a 1.2% gain in hours worked per job. The number of people with more than one job was up 1.3%, after increasing 5.8% in the fourth quarter of 2021. At the same time, the number of people who were absent without pay rose sharply (+11.2%), after falling 2.1% in the fourth quarter of 2021.