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[ATB Financial] Alberta's Economic Outlook

[ATB Financial] Alberta's Economic Outlook

by Yvonne von Jena | January 6, 2016


Alberta's Overall Outlook According to an interview of ATB Financial chief economist Todd Hirsch, low oil prices took a toll on the Alberta economy in the latter half of 2015 but the price of crude is forcing a "recalibration" which will better prepare the province's petroleum sector for when oil prices eventually rebound. Unemployment Rises The low oil prices (which are at US $40, down from US $100 in July 2014) have resulted in mass layoffs in the oil patch. The latest data showing that Alberta’s unemployment rate in November, 2015, was 7.0%, an increase of 2.6% from November 2014. Diversification of the Alberta Economy Mr. Hirsch believes that while the province's policy makers have had some success in diversifying Alberta's economy in the last 30 to 40 years, it is still primarily driven by the oil industry. He said, "We're reminded one more time that we are still very much a boom-and-bust economy, and very much beholden to where these energy prices go.” And when the petroleum industry takes a hit, it has an inevitable ripple effect in other industries, including retail, housing and financial services, he added. Oil Prices and "Recalibration" of the Alberta Economy However, Mr. Hirsch said there could be a potential silver lining that comes amid the economic uncertainty of low oil prices. He said that once the price of oil rebounds to between US $55 - $60 a barrel, the industry will be "healthier”. In the meantime, Mr. Hirsch said the province's economy will continue to "recalibrate itself," resulting in layoffs and decreased spending. "All of that is recalibrating downwards, and that is painful to see," he said. "But that will actually help position the petroleum sector to something healthier, so that when oil prices rebound, to perhaps $55 or $60 a barrel, perhaps by the end of 2016, the industry will once again be profitable and stabilize." Last month, OPEC released its annual World Oil Outlook, forecasting a slow rebound for oil prices. In the report, OPEC said it expects oil prices to climb to US $70 a barrel in 2020, and US $95 a barrel by 2040. Wages Still Falling In a report by ATB Financial, it reported that in their monthly Survey of Employment, Payrolls and Hours, Statistics Canada revealed that Alberta was the only province to record a decrease in average weekly earnings over the year in October. Though wages did increase minimally from September to October (+0.6%), wages were down by 1.8% from last year. Despite this yearly decline, Albertans continue to be paid the highest wages of all the provinces. On average, employees currently bring in about $1,145 per week (including overtime), which is 13% higher than the second-place Newfoundland and Labrador ($1,013) and 15% higher than third-place Saskatchewan ($997). The resource-driven occupations saw a reduction in wages over the course of the year and, in October, wages managed to bump up slightly (+0.7%). Home Prices In its latest quarterly Outlook Report, ATB Financial notes that Alberta’s construction and real estate sector have been showing surprising signs of strength throughout the economic downturn. Builder’s intentions are slowing although housing starts have not yet shown signs of weakness. Still, the resale home market in Alberta’s two largest cities are down. In Calgary, the latest data reveal that sales are down by about 30% and in Edmonton, sales are down by about 1.5% (year-over-year). The good news according to ATB Financial, “is that even though sales are falling, home prices have remained quite stable”. In Calgary, it is expected that prices will fall somewhere between 1 – 4% by the end of the year and in Edmonton prices “may actually even increase”. For Alberta as a whole, “home prices should remain largely unaffected”.


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