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UPDATE 1-Canadian labor productivity grows by record 3.4% in Q1

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OTTAWA, June 3 (Reuters) - Canadian labor productivity grew by a record 3.4% in the first quarter as hours worked fell more sharply than business output because of lockdowns and temporary closures caused by the coronavirus pandemic, Statistics Canada said on Wednesday.

Analysts in a Reuters survey had forecast a gain of 1.2% in the first quarter. The 3.4% gain in the first quarter followed a 0.1% decline in the fourth quarter and is the largest quarterly increase ever recorded, Statscan said.

“The many closures imposed by governments to contain the COVID-19 virus led to record employment declines, compounded by reductions in hours worked per job,” Statscan said, referring to the respiratory disease caused by the novel coronavirus.

“As business output did not decline in the same proportion as hours worked, this led to an unprecedented increase in labor productivity,” it noted.

Since March, officials across Canada shuttered most non-essential businesses and urged people to stay at home to contain the spread of the coronavirus. However, in recent weeks, most of Canada’s 10 provinces have begun to reopen their economies gradually.

Statscan said 171 million hours of work were lost in March, while 27 million hours of overtime were worked. The net effect, it said, was a loss of 144 million hours.

The accommodation and food services sector lost the most hours in March, the agency said, with a shortfall of 23.3 million hours. Other affected sectors included the construction industry (-21.5 million), manufacturing (-17.4 million) and retail trade (-12.3 million). (Reporting by Kelsey Johnson; Editing by Will Dunham)