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.
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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.
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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.