By Karan Landge

OTTAWA (MNI) – After increasing 0.4% in the first quarter, the
labor productivity of Canadian businesses fell 0.9% in the second
quarter. Temporary factors affected output more than labor, including
wildfires in Northern Alberta and a tsunami in Japan.

The productivity downturn in the second quarter was due to the cut
back in production for the first time in two years while continuing to
increase hours worked, reported the agency.

In the second quarter, the real gross domestic product (GDP) of
businesses was down 0.3%, first decrease since the second quarter of
2009.

Goods producing industries, which retreated after six consecutive
quarterly advances was a major driving factor for the decline. Output in
the services producing industries remained flat, following two quarters
of expansion, at the same time.

Hours worked in the business sector continued an upward trend,
rising 0.6% in the second quarter. While hours worked per job edged up
by 0.2%, the employment growth slowed to 0.4% in the second quarter.

After rising 0.9% in the first quarter, goods producing businesses
(-2.1%) contributed the most to the overall decline in business
productivity. The largest declines occurred in mining, oil and gas
extraction (-3.0%) and manufacturing (-1.8%). The tsunami in Japan that
disrupted the supply of motor vehicle parts to North America, shutdowns
in petroleum production and the wild fires in Northern Alberta, all
contributed to reducing output in the second quarter.

In the second quarter, productivity in the services producing
industries fell 0.2%,after two consecutive quarterly gains. The
wholesale trade, retail trade, professional services and accommodation
and food services saw productivity declines which were partly offset by
advances in other industries.

Labor costs per unit of production grew by 0.9%, their fifth
straight quarterly increase. Unit labor costs have increased on average
0.7% per quarter, since the second quarter of 2010.

The growth of unit labor costs in the second quarter was attributed
to the productivity decline, as average compensation per hour worked
remained unchanged from the previous quarter. This came after three
consecutive 1.0% increases.

In the second quarter, the average value of the Canadian dollar
(+1.9%) against US dollar continued to rise. Its appreciation rate was
slower than in previous two quarter reflecting a 2.8% increase in the
unit labor costs of Canadian businesses in US dollars, a third
consecutive quarterly advance.

By comparison, the productivity of American businesses was down
0.1% in the second quarter, after falling 0.3% in the first quarter.
Since 2008, this was the first time that there have been two consecutive
quarters of decline. American businesses’ unit labor costs increased
0.9%, after rising 1.7% in the first quarter, reported the agency.

The second quarter labor productivity figures released today were
revised back to the first quarter of 2011 at the aggregate level and to
the first quarter of 2010 at the industry level.

The term productivity in today’s release refers to labor
productivity. Labor productivity is a measure of real GDP per hour
worked. Unit labor cost is defined as the cost of workers’ wages and
benefits per unit of real GDP.

— Karan Landge is a reporter with Need To Know News In Ottawa

** Market News International Ottawa **

[TOPICS: M$C$$$,MAUDS$]