Canadian businesses saw labour productivity rebound in the third quarter of 2025, increasing 0.9 per cent after declining one per cent in the second quarter, according to Statistics Canada.
The upturn reflects a sharp recovery in business output, which rose 0.9 per cent following a 0.8 per cent contraction in the previous quarter, while hours worked declined slightly by 0.1 per cent.
Goods-producing sector drives growth
Productivity increased in nine of 16 main industry sectors during the quarter. Goods-producing businesses posted a 1.6 per cent productivity gain after a 1.3 per cent decline in the second quarter, while service-producing businesses rose 0.2 per cent after a 0.3 per cent decline.
Manufacturing contributed most to the overall productivity increase, followed by the mining and oil and gas extraction sector, agriculture, forestry, fishing and hunting, and real estate and rental and leasing. Construction and accommodation and food services also contributed to the increase.
Utilities posted a significant decline for the second consecutive quarter.
Hours worked edge down
Hours worked in the business sector fell 0.1 per cent in the third quarter after increasing in each of the first two quarters of 2025. Goods-producing businesses saw hours worked drop 0.6 per cent, more than offsetting a 0.2 per cent increase in service-producing businesses.
Ten of 16 main industry sectors posted increases in hours worked during the quarter. The agriculture, forestry, fishing and hunting sector recorded the largest decline at 5.7 per cent, while arts, entertainment and recreation posted the largest increase at 1.2 per cent.
Wildfires impact labour hours
Wildfires affecting certain economic regions of Canada in July and August contributed to a 0.01 percentage point decline in hours worked in the business sector during the third quarter, according to Statistics Canada.
The business sector recorded a loss of 1.6 million hours of work during those months, half of which was offset by overtime hours worked. The net effect for the third quarter was a loss of 789,000 hours of work.
Unit labour costs slow
Unit labour costs for businesses grew 0.3 per cent in the third quarter, a slower pace than the 0.8 per cent growth recorded in the second quarter. The measure represents labour costs required to produce one unit of output.
The increase came as hourly compensation rose 1.2 per cent during the quarter.
