Alberta Premier Rachel Notley visits Inter Pipeline's Heartland Petrochemical Complex in Fort Saskatchewan, Alta., on Jan 10, 2019.JASON FRANSON/The Canadian Press
Four years after Alberta’s economy plummeted into a deep recession, the province is starting an election year while preparing for another round of distressing economic headlines and fears of further layoffs.
The bleak picture in a province that has barely recovered from a collapse that began in 2014 and wiped out more than 133,000 jobs, has fuelled anger and resentment among workers and will likely be the main focus of a spring election campaign that could imperil the New Democratic government of Premier Rachel Notley.
After one four-year term, the Premier faces a tough re-election fight from Jason Kenney and his United Conservative Party.
In early December, Ms. Notley ordered a mandatory cut to oil production to begin this month in a bid to salvage the Prairie province’s shallow economic recovery and head off a looming crisis. While the price of Alberta’s oil increased quickly after the Premier’s decision, warning lights are still flashing, with economic growth slowing rapidly and consumer confidence shot through with pessimism. Ms. Notley also announced plans to buy rail cars to ship oil and has asked for proposals to build a refinery in the province.
Ground zero for Alberta’s economic plight is downtown Calgary, where gleaming office towers once bursting with the executives who ran the country’s oil and gas industry are now one-third empty. The record vacancy rate has been compared to downtown Pittsburgh’s implosion after the collapse of the U.S. steel industry.
Alberta’s projected economic growth was slashed for 2019 due to overloaded pipelines and a supply glut in the fourth quarter that sent the price of a barrel of Alberta oil tumbling to near US$10. With the price back to the mid-US$40 level as the mandatory production cuts take effect, Toronto Dominion Bank is projecting that the provincial economy will expand by only about 1.4 per cent in 2019.
While the province is not forecast to face a recession this year, the prognosis for recovery is weak. Alberta has yet to fully come back from the economic collapse that started in 2014 and bottomed out in mid-2016 as flames rushed into Fort McMurray. The recent economic headwinds are giving business people in Calgary a sense of déjà vu.
“After 2014, there was fear we were in a free fall and we didn’t know how long it would last," said Adam Pekarsky, an executive recruiter whose office overlooks Stephen Avenue in Calgary. "Now people are feeling frustration and agitation. We know where the bottom is now, we just hoped we wouldn’t see it again.”
Alberta’s economy contracted by nearly 7 per cent between 2014 and 2016, shedding over 133,000 jobs in the process. Many of those jobs were lost in Calgary. The city’s unemployment rate has bounced around 8 per cent for the past year, leaving Calgary tied with St. John’s for the highest unemployment level among Canada’s large cities.
“We’re not looking at a recession in Alberta, but that doesn’t mean a lot," said Todd Hirsch, an economist with the provincially owned ATB Financial. "We’re looking at a weak starting point and weak growth. That’s pretty weak.”
The province had a few months of modest growth in early 2018, he said, but after the slump in the price paid for Canadian oil and disputes with Ottawa over delays in new pipeline construction, consumer sentiment faltered before Christmas. Alberta’s “sense of resilience got the stuffing kicked out of it,” he said.
While the provincial labour market has shown some improvement, he warned that the data behind the numbers indicate mixed results. Many of the new positions have tended to be lower paying and in the service sector. He warns that official figures mask a lot of underemployment.
About two-thirds of the number of positions lost in the 2014-2016 recession were regained, largely in 2017, according to Trevor Tombe, an economist at the University of Calgary. Almost 44,000 new jobs were created in Alberta in 2018, barely enough to cover population growth.
Alberta still has advantages over other provinces. It has the youngest, most affluent, most productive workforce in Canada. “Although we’re weaker than we were in 2014, we’re still the strongest in Canada,” Prof. Tombe said.
Last year, 67.2 per cent of Albertans over the age of 15 were employed, according to Statistics Canada, down from 69.3 per cent in 2014, but still the highest rate in Canada. Ontario’s rate of employment for the same age group was only 60.9 per cent in 2018.
One group that has seen no sign of recovery yet, according to Prof. Tombe, is men between the ages of 15 to 24. Just over half are now employed after the number with a job dropped by 12 percentage points during the recession. Economists say that the uncertainty of the past six months likely led to cuts in business investment that will disproportionately continue to affect that group, Prof. Tombe said. The construction industry, as well as jobs in support of oil and gas development, which employ many of those men, are not expected to see much of an increase in 2019.
Two years of deep recession and two years of slow recovery have left Calgary changed, less willing to take risks, Mr. Pekarsky said. He pointed to a plebiscite in late 2018 in which Calgarians voted not to pursue an Olympic bid as a sign of new caution.
“This is a city where you drilled a hole in the ground and if there wasn’t something there, you just drilled another hole," he said. "That risk-taking, that level of aspiration was always Calgary’s secret sauce. It doesn’t feel the same as it used to. This just isn’t the Calgary I knew just a few years ago.”
Despite the federal government’s decision to buy the Trans Mountain pipeline for $4.5-billion in mid-2018, many blame Ottawa and Prime Minister Justin Trudeau for the province’s economic woes. They point to the federal government’s inability to get a pipeline built to one of Canada’s coasts as a reason for the sometimes wide gap between the price paid for Canadian oil and international benchmark prices.
Greg Nichols, formerly a Calgary-based executive for Enbridge, now lives in Prince George. After he was laid off from the pipeline giant, he spent nearly two years volunteering and working on projects in Calgary before he found a permanent job outside Alberta.
He still maintains a home in Calgary, and considers himself lucky, having no debts and the ability to move. He says friends in the oil and gas sector, some former executives, work for just above minimum wage or have chosen to become stay-at-home dads while they learn new skills.
“There’s a lot of anger on the street. Some people I know, smart people, are out there throwing out conspiracy theories about Ottawa looking to destroy the energy sector,” he said. “It eventually will get better, but it’ll never be the same.”