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May 20, 2022LABOUR PRODUCTIVITY AND HOURS WORKED, 2021 [PRELIMINARY] Statistics Canada has released preliminary labour productivity accounts for 2021.
The data are consistent with provincial and territorial economic accounts as well as preliminary real GDP by industry data released on May 2 2022. Data reported below focus on business sector industries and do not include either government or non-profit institutions. For example, education refers only to private educational institutions and not government-funded schools.
During 2020, the imposition of widespread restrictions to contain the COVID-19 pandemic resulted in significant declines in hours worked in every province as well as in most business industries. However, the decline in real GDP from business sector industries was much lower than the drop in hours worked - raising productivity substantially in all provinces.
As COVID related restrictions eased in 2021, there was a significant increase in hours worked across many industries without as large a rebound in real GDP. As a result, productivity was down for most provinces.
Nova Scotia's business sector labour productivity fell by 3.9% in 2021. National productivity was down 5.8%% with declines in all provinces except Prince Edward Island and New Brunswick. Newfoundland and Labrador reported the largest decline in labour productivity.
Labour productivity represents the amount of real value added generated per hour worked. Nova Scotia's business sector labour productivity was $44.0 in real value added per hour worked in 2021. National business sector labour productivity was $58.4 in real value added per hour worked. Labour productivity is considerably higher in resource-producing provinces (Newfoundland and Labrador, Saskatchewan, Alberta) as these industries generate large amounts of real value added with comparatively few hours worked. Labour productivity was lower in all three Maritime provinces.
As economic conditions normalized in 2021 after the pandemic-related distortions of 2020, Nova Scotia's labour productivity still remained elevated from their pre-pandemic levels in 2019. Nova Scotia's labour productivity in 2021 was 6.8% higher than it was in 2019. Nationally, labour productivity was 1.6% higher than in 2019. Productivity gains over this period were strongest in the Maritimes while only the prairie provinces continue to report lower labour productivity in 2021 than in 2019.
As COVID restrictions eased, there were strong rebounds in hours worked - particularly among those industries that had the sharpest declines during the first waves of the pandemic in 2020. Nova Scotia's business sector hours worked increased by 11.7%. National hours worked were up 11.4% with gains in every province. British Columbia had the strongest gains while New Brunswick and Saskatchewan had the smallest increases.
Although there was a rebound in hours worked in 2021, the overall level of employment was still smaller than observed in 2019. Nova Scotia's hours worked in 2021 were 3.3% lower than in 2019. National hours worked were down 3.5%. No province reported higher hours worked in 2021 than in 2019. The largest gaps were in Newfoundland and Labrador and Prince Edward Island. Manitoba's hours worked in 2021 were closest to their pre-recession levels.
Nova Scotia's business sector real value added increased by 7.2% from 2020 to 2021 - the second fastest among provinces after Prince Edward Island. National business sector value added was up 4.9% with gains in seven provinces. Saskatchewan had the largest decline in business sector real value added.
Compared with 2019, business sector real value added was up for the Maritime provinces (3.2% in Nova Scotia) as well as in British Columbia. National real value added from the business sector remained 1.9% below pre-pandemic levels in 2021. Saskatchewan's business sector real value added was furthest from its pre-pandemic level.
Labour productivity represents the difference between changes in hours worked and changes in real value added. Real value added can be approximated as the sum of changes in hours worked and changes in labour productivity (plus an interaction term that reflects the product of changes hours worked and changes in labour productivity).
Nova Scotia's labour productivity decline of 3.9% offset a 11.7% increase in hours worked (with a 0.5% interaction) to generate a 7.2% rise in business sector real value added.
In 2020, most of Nova Scotia's business sector industries reported lower hours worked. For most industries, reductions in hours worked were partially offset by gains in productivity. Rising productivity limited the reduction in real output despite reduced labour input. There were exceptions. In arts, entertainment and recreation; accommodation and food services; administration and business support; and transportation there were sharp reductions in hours worked as well as declines in productivity. Arts, entertainment and recreation as well as accommodation and food services reported the largest declines in real value added. These two industries were among the most restricted in 2020 due to the high-contact nature of their operations.
In 2021, almost all industries reported large gains in hours worked along with falling labour productivity. There were increases in labour productivity for agriculture/aquaculture, support for agriculure/forestry, construction, wholesale and retail industries. The largest increases in hours worked were reported in fishing, arts/recreation and accommodation/food. The largest declines in productivity were reported in support for mining/oil/gas, arts/recreation and fishing.
Compared with pre-pandemic levels from 2019, the largest increases in productivity were observed in support for agriculture/forestry (which also had the largest decline in hours worked), followed by construction. The largest declines in productivity over the 2019 to 2021 period were reported in arts/recreation and support for mining/oil/gas.
Nova Scotia's 2021 productivity decline was spread across both goods industry and services industry aggregates, though the declines in Nova Scotia were less than the national average.
Compared with 2019, Nova Scotia's goods industries reported 13.6% higher productivity in 2021 while service industry productivity in Nova Scotia was 3.5% higher in 2021.
Although Nova Scotia's labour productivity growth outpaced the national averages for both goods industries and services industries, the province's productivity levels remain well below national averages.
The distortions to labour productivity caused by the pandemic and recovery interrupted a trend of rising business sector real value added.
Unit labour costs measure the amount of labour compensation required to generate $1 of real value added. With much of Nova Scotia's 2021 employment gains concentrated among the lower-wage industries that had the largest losses in 2020, overall compensation per hour worked declined 2.6%.
Business sector employee compensation per hour worked fell by 2.6% in Nova Scotia in 2021. National employee compensation was down by 1.1% with declines in 6 provinces - led by Alberta. Saskatchewan reported the largest rise in hourly employee compensation in the business sector in 2021.
Although employee compensation per hour worked fell in 2021, it did not offset the increases observed in 2020. Nova Scotia's employee compensation per hour worked in 2021 was 11.8% above the 2019 level. National employee compensation was up 10.4% over this period with the fastest growth in Quebec and British Columbia. All provinces reported rising hourly compensation over this period, but Alberta's growth was the slowest.
Unit labour costs represent the amount of labour compensation required to generate $1 in business sector real value added. Unit labour costs rise when employee compensation per hour rises. Unit labour costs fall when labour productivity improves.
In 2021, Nova Scotia's labour productivity decline was larger than the fall in hourly employee compensation. As a result, unit labour costs increased by 1.4%. National unit labour costs were up by 5.0% with gains in eight provinces. The largest increases in unit labour costs were in Saskatchewan. Only Prince Edward Island and New Brunswick reported lower unit labour costs in 2021 than in 2020.
Business sector unit labour costs were $0.726 per $1 of real value added in Nova Scotia. This was fourth highest among provinces, exceeded by Ontario, Quebec and British Columbia. National unit labour costs were $0.673 per $1 of real value added. The lowest unit labour costs were reported in resource-producing provinces (Saskatchewan, Newfoundland and Labrador and Alberta) reflecting the relatively low labour intensity of resource production.
Nova Scotia's unit labour costs have generally been highest among provinces, reflecting the Province's relatively labour-intense mix of output that is concentrated in service industries. Data for labour share are lagged by three years, so this reflects the pre-pandemic composition of production.
Between 2019 and 2021, unit labour costs increased 4.8% in Nova Scotia's business sector. National unit labour costs were up 8.5% with gains in all provinces but Prince Edward Island. Manitoba reported the largest increases in unit labour costs over the pandemic.
Source: Statistics Canada. Table 36-10-0480-01 Labour productivity and related measures by business sector industry and by non-commercial activity consistent with the industry accounts
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