This paper addresses the paradox between an increasing share of employment and a lower productivity growth of Canadian services vis-à-vis the rest of the economy in the period spanning the three decades from 1961 to 1992. It attempts to reconcile this apparent contradiction with the so-called Baumol disease, which predicts a decline in the share of services given their relative price. In short, Canadian services suffer little from the Baumol disease when capital is taken into account. However, their share of domestic final demand does not keep pace with their employment and value added shares. Yet the service shares of domestic final demand do rise and this remains a puzzle to be explained. One explanation could be a shift of innovation towards services and, related to this, a shift of consumer preferences towards these new services. If R&D figures are anything to go by, they tend to bolster this explanation.