The Bank of Canada on Wednesday warned that Canada is trapped in a “vicious circle” of weak productivity, a cycle it says is holding back growth and undermining long-term economic resilience.
In a speech to Quebec economists, Deputy Governor Nicolas Vincent said Canada’s labor productivity growth has slowed dramatically: it averaged about 3% annually in the 1960s and 1970s, declined to around 1% between 2000 and 2019, and now sits below 0.5%.
Vincent argued that weak productivity drags on wage growth, which in turn weakens household demand. That soft demand discourages firms from investing in technology or equipment, further depressing productivity.
He called for a coordinated, economy-wide response. Key policy recommendations included simplifying regulatory burdens, increasing competition in sectors such as telecommunications, transportation, and finance, and investing in workforce training — especially by making it easier to recognize foreign credentials.
Vincent also made a direct link between productivity and affordability: “Deep down, Canada’s affordability problem is really a productivity problem.”
On the data front, Statistics Canada reported that labour productivity fell 1.0% in the second quarter of 2025, the steepest decline since late 2022.
Information for this story was found via the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
One Response
The decline of productivity is directly related to excess socialism, excess government size, and excess government spending and resulting public debt accumulation. The decline of 50% during the Trudeau Liberal era is a great example. Mark Carney seems to have a better view on the economy and the direction in which Canada should head, but the Canadian economy and public opinion is a huge tanker moving under full steam, in the wrong direction. Add the headwind of the US rearranging global trade in general and trade with Canada in particular and we have a long row to hoe. I only hope the Canadian electorate will give him a proper chance.