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Unit labour cost growth, inflation and productivity growth in Canada and the United States

Author

Listed:
  • Ryan Macdonald
  • Josip Lesica
  • Jenny Watt
  • Rupert Allen

Abstract

The unit labour cost is often used as a broad measure of international price competitiveness. It deviates from the inflation rate when the real wage rate and labour productivity grow at different paces. Since the COVID-19 pandemic, Canada has experienced an acceleration of unit labour cost growth and a significant upward deviation from the inflation rate, while this has not happened in the United States. This article decomposes unit labour cost growth in the Canadian business sector into its sources and finds that Canada’s negative labour productivity growth since the pandemic has been the key driver of the accelerated unit labour cost growth. Additionally, the large and widening gap in unit labour cost growth between Canada and the United States since the pandemic is entirely attributable to the labour productivity growth gap between the two countries.

Suggested Citation

  • Ryan Macdonald & Josip Lesica & Jenny Watt & Rupert Allen, 2025. "Unit labour cost growth, inflation and productivity growth in Canada and the United States," Economic and Social Reports 202500400004e, Statistics Canada, Analytical Studies and Modelling Branch.
    • Handle: RePEc:stc:stcp8e:202500400004e
    DOI: https://doi.org/10.25318/36280001202500400004-eng
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    Keywords

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    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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