N.W.T. productivity declines while other territories surge

Amid a historic national rise in labour force productivity, the Northwest Territories is alone among jurisdictions in Canada in seeing a significant decline, according to new preliminary data from Statistics Canada released Thursday.

While the country averaged a never-before-seen 8.4 per cent increase in productivity, and neighbouring territories Yukon and Nunavut saw productivity gains upwards of 20 per cent, the N.W.T. saw its productivity drop by 8.1 per cent.

Labour force productivity is a statistic obtained by taking the gross domestic product (GDP) of a region its overall economic output and dividing it by total hours worked.

A drop in productivity may be an indication of more people working for less economic gain, or of drops in economic activity without corresponding drops in employment.

According to the Statistics Canada release, the N.W.T.'s poor performance is largely reflective of a "considerable scaling back of activities" in its biggest sector mining.

Over the course of the past pandemic year, several mines have shut for extended periods, citing pandemic restrictions and local outbreaks. That's combined with a significant drop in diamond prices, lowering overall profitability.

That has an especially big impact, as mining is a sector where, under normal circumstances, a single working hour can contribute hundreds of dollars to GDP.

But the numbers also show productivity drops in other areas: oil and gas, warehousing and transportation, communications, and even education.

It's also the second year in a row productivity has dropped the N.W.T. posted an even bigger decline of 10.5 per cent last year, also driven partly by massive drops in output from the mining sector.

Finance Minister Caroline Wawzonek said the numbers "highlight the urgency of the situation" the territory is in.

"Even within our resource economy, we're pretty narrowly focused," she told the CBC."We need to work to diversify our economy, and that includes diversifying our mineral resource sector.

"At the same time, we very fortunately haven't experienced the number or severity of the lockdowns and the employment declines that have been seen in a lot of the rest of Canada," she said.

"For us, it's not a story where COVID[-19] has fundamentally changed the situation we're in."

Yukon, Nunavut post historic gains

While working hours in the N.W.T. fell eight per cent, thathad nothing on drops elsewhere in the country. Most provinces and territories saw declines upward of 12 per cent.

In Yukon and Nunavut, those drops were among the largest in the country, with roughly 17 per cent fewer working hours to go around in 2020.

But at the same time, high value sectors like mining and construction pumped more even money into the economy than in non-pandemic years.

The result was the biggest productivity gain in the country for Nunavut, at 28.4 per cent, which saw the oil and gas and mining sectors productivity climb by almost 42 per cent.

Yukon, too, saw historic gains. At 24 per cent, it was the biggest single-year increase since the financial crisis in 2009.

Take these numbers with a grain of salt

While these numbers may look bad for the N.W.T., Pedro Antunes, chief economist at the Conference Board of Canada, cautions that they shouldn't be interpreted as dark clouds on the horizon.

"We have to be very careful about interpreting a decline in labour productivity as something very negative," he said.

"For a small economy like the Northwest Territories, things are going to be very variable, and it can be very dependent on the impacts on one company or one segment of the economy."

Labour force productivity is generally used to assess whether industries are continuing to adopt new technologies to increase their efficiency, he said and not to determine the health of an economy mid-pandemic.

And on that front, there's actually reason to be hopeful, Antunes said.

"In the last 20 years, we've seen some very flat numbers on labour productivity, and in recent years that trend has been turning around," he said. "We're really seeing some of the benefits of adopting technology."

In the N.W.T. and other territories, the more important question is whether the private sector still wants to invest in those places.

"Are we seeing a decline in private investment in adoption of technology in a way that's maybe hurting the overall competitiveness, and the overall output?" he said. "I think that's a more important measure especially in the smaller regions."

"I would consider waiting until 2021, or even 2022, before making drastic interpretations of this," he advised, "until we know, when things settle post-pandemic, what's really going on within a certain industry."