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Canada's Q1 Labor Productivity Unexpectedly Slips on Mild Contraction in Pace of Business Output

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The labor productivity of Canadian businesses fell 0.5% quarter over quarter in Q1, after edging down 0.3% quarter over quarter in Q4 2025, said the country's statistical agency on Wednesday.

The Q1 decline contrasts with a 0.3% quarter-over-quarter consensus rise figure provided by Scotiabank.

The decline in Q1 reflects the mild contraction in the pace of business output, noted Statistics Canada in a statement.

Hours worked in the business sector increased 0.4% quarter over quarter in Q1, after posting slight declines in the previous two quarters, said StatsCan. The increase in Q1 reflects a 0.1% growth in the number of jobs. it added.

Meanwhile, average hours worked went up 0.3%.

As labor productivity dropped in Q1, the 0.9% rise in hourly compensation resulted in a 1.4% growth in unit labor costs to businesses, which marks the fourth consecutive quarterly increase, it added.

Unit labor costs represent the labor costs required to produce one unit of output.

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