The Organisation for Economic Co-operation and Development (OECD) calculates that the Canadian real exchange rate in terms of unit labour costs has appreciated about 17 per cent since the beginning of 2005. The bilateral Canada-U.S. measure shows a 31 per cent increase in relative Canadian unit labour costs over the period.
Relative unit labour costs can be broken down into three components: the nominal exchange rate, relative hourly compensation and relative productivity (Chart 12). Since the beginning of 2005, the appreciation of the Canadian dollar explains about two-thirds of the increase in unit labour costs in Canada vis-à-vis the United States.