A Sputtering Economy at election time

It’s the economy Stupid! James Carville 1992 in Bill Clinton’s election

As Canadians prepare to go to the polls this fall, a major element in decision-making is the economy. Incumbent governments are usually punished in poor economic times. This campaign, our politicians are attempting to capture support with shiny new promises or complaints about the ethics and religions of the other leaders.

The housing market is soft, but consumer spending is strong. Business investors are sitting on their wallets as we suffer from trade problems with China, pipeline , and delays in the new NAFTA (USMCA).

After a stall-out in 2018, the Canadian economy has perked up a bit.  Growth is expected to be moderate; (1.4% GDP according to the Conference Board of Canada) and job growth and wage increases are anticipated. Nationally, unemployment is at its lowest rate in 40 years at 5.7%. 

So, while the Canadian economy is muddling through; the story for Alberta is worse. Low and volatile gas prices, insufficient pipeline takeaway capacity, weak capital investment and uncertain agriculture commodity prices are a drag on the resource sectors.  International investors have fled Alberta, divesting $40 billion in assets. Capital spending in the oilsands is cut in half.  Building permits are stagnant. The unemployment rate is 7.2%.

With a steady drumbeat of anti-oil rhetoric and policies from the federal government, the 5 year-long recovery after the energy price collapse of 2014 has been unsteady and erratic.  

To the extent that governments are judged based on economic performance the Liberals might expect to see mixed support in central Canada and poor support on the prairies.

There are two other economic issues that are part of voters’ economic calculations this election. Climate change and pipeline policies will form part of the equation. On climate change neither the Liberals nor Conservative platforms are committed to reaching the Paris Accord CO2 reduction targets for Canada.  The NDP and Green Party have more aggressive climate change plans that propose dramatic changes in the economy.

Statistics Canada calculations by Trevor Tombe University of Calgary

And on pipeline access, the Liberals claim that purchasing the TransMountain pipeline is a signal of their support for Alberta’s energy industry. The Conservatives take the view that it was Liberal policy failures that drove the private sector out; necessitating government intervention. They propose a national infrastructure corridor. The NDP and the Green Party oppose the TransMountain pipeline.

As Alberta’s economy wallows in a near-recession trough, the Liberal Party can expect little support at the polls. That is a function of Alberta’s weak economy and the view that the federal government is largely to blame.