Grinding Gears – Wiggling out of recession

We are all grinding gears - don't know which way is up 
Lyrics by Strung Up

Alberta’s economy has suffered a tough recession for two years, we are still a marvellous and pretty wealthy place to live. Despite the downturn, Alberta has the highest GDP per capita in Canada (well, except for the territories). Alberta also has the highest average family income in the country. And retail sales receipts are now above pre-recession levels. This is a result in no small part, to the resource industries and our strong export based economy.

Alberta punches above its weight when it comes to high-income earners. We are 12% of Canada’s population and 24% of income earners. About 50% of those high-income earners live in Calgary and 25% live in Edmonton. Fort McMurray has about 5% of those high-income earners. But their numbers declined by over 40% during the recession.

imagesNot everyone is living high off the hog. Ten per cent of the population is low-income families. And our relatively high cost of living makes things tougher. The pressure on food banks is higher than ever.

Our economy still bumps along the bottom, it is improving, but the signals are mixed!

  • Oil-patch workers wages have dropped 10% this year. Restaurant workers wages haven’t gone up (wait for the minimum wage increases to be reported by Stats Canada next month). That said, overall wages have crept up a bit in the past year.
  • Capital spending in the energy sector declined by 30% in 2015 and another 30% in 2016. Planned expenditure will be mostly flat for 2017 and 2018; Capital spending in oilsands is expected to be about $15 billion this year.
  • The Alberta Energy Regulator is forecasting a more robust year in drilling activity this year.
  • Alberta manufacturing had a good first half of 2017 but there have been 3 months of declining manufacturing shipments. Shipments are up 10% compared to this time last year.
  • The October jobs report showed a pretty good jump in private sector jobs (mostly full-time) up 14,000 jobs! And there was a decline in public sector jobs down 2,300.
  • But the provincial unemployment rate has remained basically unchanged at 7.8%. Calgary’s rate is a whopping 8.8%, Edmonton’s is 8.6%. The unemployment rate for Canada is 6.3%
  • September new vehicle sales are up by about 10% compared to last year, mostly SUV’s and trucks.
  • CMHC thinks that the little boom in housing starts in 2017 will dissipate in 2018. They forecast it will take a couple of years to eat up the over-supply. Non-residential construction continues to flounder, particularly in Calgary.

Severely Normal Albertans will continue to see these mixed results in the year ahead. A persistently high unemployment rate and continued low prices for energy products will slow Alberta’s exit from the worst recession since the 1980s. Some optimism resulting from improved pipeline access will buoy energy capital spending. But risks to our competitiveness abound. Particularly as the US becomes less regulated, less taxed and more protectionist.

As we head towards the next election, the NDP will make the case that their management helped weather the storm without destroying public services. The UCP and Alberta party will point to business ‘unfriendly’ policies and argue that they are better positioned to speed up economic recovery than an NDP government.