Calgary and Edmonton on the road to economic recovery – Conference Board

Unless oil price rises above $50/b, high paying oil and gas jobs may not return until 2018 or later

Gradually rising oil prices will help pull the economies of Calgary and Edmonton out of recession this year, according to The Conference Board of Canada’s Metropolitan Outlook: Spring 2017.

Calgary’s economy is expected to grow for the first time in three years, with real GDP projected to expand by 2.3 per cent in 2017.

This should allow the Calgary economy to add 8,800 jobs this year and an additional 10,100 jobs in 2018, reversing a decline in employment of 12,500 in 2016.

Unfortunately, the high paying oil, gas and construction jobs before the recession will take longer to come back, if they even do, according to Todd Hirsch, Alberta Treasury Bank chief economist.

“A year from now if we’re still at $50 oil, we might not see the energy sector hiring back all those people that they laid off. So, it’s hard to say when the good quality jobs will come back; they might not come back,” he said in an interview.

“There is a bright side to this and that is, with lower wages in Alberta, other sectors outside of oil and gas will be more competitive. They’ll have a chance to hire some really talented, experienced people and that will actually give Alberta a fighting chance at diversifying.”

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Slowly rising oil prices should be enough to aid Calgary’s struggling energy industry, which has endured major head office layoffs over the past two years.

Modest additions to payrolls won’t aid the downtown core’s very high office market vacancy rate, which reached 25 per cent at the end of 2016, according to Conference Board of Canada.

There is a glimmer of hope that other industries may see Calgary as an excellent opportunity.

“We have seen some investments in the petrochemical side, some because of incentives that were offered by the province. But in Calgary, we do expect some uptick in tech space simply because all the ingredients are there right now – the talented labor force is available, really great office space and industrial park space and that’s what we were lacking four years ago,” said Hirsch. 

A recent trade mission to California’s silicon valley where large tech companies operate yielded fruit, according to Calgary Mayor Naheed Nenshi in a CBC interview.

“This particular company was someone who had never really even heard of Calgary last month and over the course of the last three weeks, we met them here,” he said. “They came up to visit. They started scoping out places. And when we met them yesterday, they said: ‘Have you got the lease with you so that we can sign it?’

While Nenshi didn’t provide details, Nenshi claims it’s worthy of a ribbon-cutting ceremony, according to CBC.

Job growth will push Calgary’s unemployment rate down from 2016’s 22-year high of 9.4 per cent to 8.0 per cent by next year while Edmonton’s economy will also benefit from higher oil prices, particularly its goods-producing industries.

Rising oil production will also directly benefit Edmonton’s resources, primary and utilities sector, which is forecast to post output growth of 6.3 per cent this year.

This will help fuel a turnaround in the city’s manufacturing sector, which is closely linked to the energy industry.

Edmonton’s public sector, which has acted as a bulwark against the energy sector downturn, is expected to continue to support economic growth over the near term, albeit with a more modest contribution.

In all, Edmonton’s economy is expected to expand by 2.4 per cent in 2017, which should help generate about 5,700 new jobs, up from the paltry 170 new jobs added in 2016.

Alberta’s services sector is also set to improve starting this year. With employment and disposable income expected to rise, consumers should slowly increase spending.

“Alberta’s economy, with energy sector prices more stable these days, has really gone a long way to stabilizing the energy sector, which in turn has brought back some optimism even though it’s still a bit modest and a bit timid but there’s definitely a different attitude in this province than there was a year ago,” Hirsch said.