The Bank of Canada issued a stark warning about the country’s weak labour productivity and low levels of business investment on Tuesday, saying the situation is an emergency that makes it harder to control inflation and which could erode living standards if left unaddressed.
In an unusually blunt speech in Halifax, senior deputy governor Carolyn Rogers said that Canada is slipping further behind the United States and other peer countries when it comes to economic output per hour worked.
She pointed to weak business investment, meagre competition and a failure to properly integrate skilled immigrants into the Canadian work force.
“I’m saying that it’s an emergency – it’s time to break the glass,” the central bank’s second-in-command told the business audience.
Canada has long lagged the United States when it comes to how much the economy produces per hour of work. But the situation has gotten worse over the past decade, especially coming out of the pandemic. Before the final quarter of last year, productivity had declined for six straight quarters.
“Back in 1984, the Canadian economy was producing 88 per cent of the value generated by the U.S. economy per hour,” Ms. Rogers said.
Auerback: Canada’s productivity problem runs deep and ripples far in the economy
“That’s not great. But by 2022, Canadian productivity had fallen to just 71 per cent of that of the United States. Over this same period of time, Canada also fell behind our G7 peers, with only Italy seeing a larger decline in productivity relative to the United States.”
The speech contained few hints about the near-term trajectory of monetary policy ahead of the bank’s next