Canada’s economy finally got some good news on the productivity front. Statistics Canada (Stat Can) data shows labor productivity jumped in Q4 2024. It was big enough to print annual growth for the first time in years. Before getting too excited, the growth was still abysmal and experts see tariff threats potentially derailing progress in a matter of weeks.
Canadian Productivity Climbed For The First Time In Years
Canadian productivity showed some signs of life in the last quarter of 2024. Labor productivity climbed 0.6% in Q4, following three consecutive quarters of decline. Behind that move was the business output growing at twice the previous quarter’s rate, while hours worked advanced much slower.
The quarter was enough to push a flat year into growth territory. In 2024, real GDP of businesses advanced 1.1% against 0.6% growth in hours. The agency’s calculations show this led to 0.6% growth in annual productivity, marking the first year of growth following 4 years of contraction.
“Following a dismal post-pandemic performance, Canadian productivity trends finally showed some spark late last year,” said BMO Chief Economist Douglas Porter.
Adding, “No one will applaud that figure, but it basically matches average growth over the past 25 years.”
Canada’s Productivity Gains Still Lags, Set To Slow Further
Not particularly impressive growth, but some growth is better than none. According to Porter’s calculations, productivity growth has averaged annual growth of 0.3% since 2019. “So, clearly, the pandemic left a lasting mark,” he said.
Or at least the credit expansion did.
Firms getting ahead of potential tariff threats is believed to be a big driver of growth in Q4. That potentially means some front-loading, which will likely be reduced in the coming months. On top of that, the actual trade war has the potential to further erode future growth, according to BMO.
“Looking ahead, it’s unfortunate to say, but the trade war will likely ding productivity again. With manufacturing, resources and agriculture under direct fire—all sectors with high levels of productivity—this points to weaker output per hour overall,” warns Porter.
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