Canadian business labor productivity fell 1.0% in Q2 2025, following a revised 0.1% fall in Q1 and missing expectations of 0.2% growth. It was the sharpest drop since Q4 2022 (-1.1%), as uncertainty surrounding international trade led businesses to reduce their output for the first time in seven quarters while hours worked continued to increase but at half the pace of the previous quarter. Notable declines were seen in utilities (-4.0%), wholesale trade (-2.6%), and manufacturing (-2.1%), while construction edged down 0.1%. Also, hourly compensation fell 0.5%, its first decline since early 2021, pushing unit labor costs up 0.5%.