‘Productivity emergency’ most widespread in history outside pandemic

Article content

When it comes to Canada’s productivity emergency, “the entire country is feeling the pain.”

That’s according to the economists at Fédération des caisses Desjardins du Québec who say output per capita fell in every province last year, making it the most broad-based decline in standard-of-living in Canadian history outside of the pandemic.

“Only at the peak of the pandemic did we see all 10 provinces report a decrease,” they said.

Article content

What’s more, early data from 2024 suggests the trend is continuing.

Earlier this year, Carolyn Rogers, senior deputy governor of the Bank of Canada, warned that the country was facing a “productivity emergency.”

Canada in 2022 was producing just 71 per cent of the value generated in the United States economy per hour and the capital spending gap had widened, she said.

The country’s population surpassed 41 million for the first time this year, and though these gains are keeping the economy afloat on the surface, output per person has fallen in six of the past seven quarters, said Desjardins economist Marc Desormeaux.

Per capita output measures our standard of living.

“So even though Canada’s economy is still growing and churning out jobs, many people and businesses feel worse off than they did a year and a half to two years ago,” he said.

It could even be worse depending on where you live.

Outside of Quebec and Ontario, gross domestic product per person is not only lower than before the pandemic, it is lower than the peak in 2014-15.

“That means many people outside our two biggest provinces feel worse off today than they did 10 years ago,” he said.

Article content

Article content

Desjardins says part of the problem is that output and employment have shifted away from highly productive industries like mining and oil and gas toward lower productivity sectors such as accommodation, food services, recreation and public administration.

Investment has fallen in Canada’s oil industry and “other sectors haven’t stepped up to fill the gap.”

“Although oil and gas investment will remain a critical driver of Canada’s prosperity going forward, neither the Alberta government nor the Alberta Energy Regulator see it returning to pre‑2014 rates this decade,” said Desormeaux.

Another problem is that small- and medium-sized businesses, which are less productive than larger companies, make up a bigger share of Canada’s economy than in the United States.

Canada is good at producing start-ups, but it falls short of growing them to scale.

Desjardins says Canada’s innovation policy needs to be expanded to support growth, commercialization and early‑stage investment in addition to research and development.

The report stresses that population growth and immigration are not responsible for Canada’s slide in standard of living. Over time skilled workers from other countries should boost productivity.

Article content

In fact, Dejardins’ research suggests that Ottawa’s decision to cut the temporary resident population will weigh on, rather than benefit, the economy.

 Sign up here to get Posthaste delivered straight to your inbox.

The world’s population has grown by 1 billion since 2010 and is expected to surpass 10 billion by 2050, but some populations are aging, says BofA Global Research, which brings us today’s chart.

Countries with the largest projected rise in working population over the next 25 years are India, Nigeria and Pakistan. The countries with the biggest decline in this population are China, Japan and Russia.

“A nation’s potential growth is a function of working-age population growth, labour productivity and innovation,” said BofA.

Take India, for example. Last year it overtook China as the world’s most populous nation with more than 1.4 billion people. Its demographics are a big factor behind the country’s share of the MSCI EM equity index rising from 4 per cent to 19 per cent in the past 20 years, the strategists said.

---

Article content

Article content

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Today’s Posthaste was written by Pamela Heaven, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com.

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.

Article content