One really shouldn’t be so foolish as to predict Edmonton’s economy.
It’s like predicting how the Oilers will do. Who, six months ago, would have predicted our hockey team’s current dire straits?
This column has been all gloom and doom on the future of Edmonton and Alberta’s economy.
I’ve been arguing that the now-three-year crash in oil and gas prices shows no sign of let-up, that construction is slowing, that “carbon restraint” is clamping down on global demand for our oil and gas and at the same time raising Alberta’s electricity costs: That sky-rocketing provincial debt and a perceived anti-business bias from the current provincial government has scared off investment in Alberta.
Not a pretty picture.
But in the past few weeks a flurry of economic forecasts are painting a more optimistic future – at least for 2018 and 2019.
The basic theory seems to be that things have been so bad — a 3% drop in Alberta’s economic output in 2015, followed by another 3% drop in 2016 — that, as night follows day, recovery simply had to happen.
Sure enough, the pundits are predicting 3% to 4% growth and recovery of Alberta’s economy this year, then 2.2% growth in 2018.
It ain’t what it was back in 2014 … but it’s a heck of a lot better than 2015 and 2016.
Just in the last few weeks, oil has sorta/kinda/maybe started to recover! The price has been over $50 US per barrel for several months and has lately inched its way up to $57 US.
Every dollar increase counts big-time for the oil sands – where cost-cutting has driven the break-even price to under $25 US.
Suddenly we’re seeing rebounding production from the oilsands, with big increases in oil exports to our one-and-only foreign market, the USA.
“In the spring of 2017,” says an ATB Financial report, “total export (of oil and gas) was a quarter higher than the year before … but a quarter lower than the peak in 2014.”
The big Calgary-based oil company CNRL expects to produce 18% more oil from the oil sands next year compared to 2017, but will cut its capital spending by 10%, to $4.3 billion.
Suddenly there’s more confidence among business people as a whole, more signs of growth.
Edmonton hotels have been in a serious sectoral-recession, occupancies dropping to 50% or more. Now it’s more like 60% plus – not great, but better than before.
Commercial realtors are reporting more interest in land and buildings in the Nisku and Acheson industrial parks, where activity was almost at a stand-still during 2015 and 2016. Welding shops are hanging “help wanted” signs, but at $20 or $25 an hour, not $50.
Remember too that Edmonton was spared from the worst of the downtown, thanks to public sector employment, downtown construction and construction of the Sturgeon Refinery near Fort Saskatchewan.
We were hurt, but not mortally wounded like Calgary and other resource-based regional centres.
So why the uptick now?
As always, it’s all about oil.
With the outlook brightening, oil plants, refineries etc. are playing catch-up, spending and hiring for maintenance and replacements that had been deferred during the miserable years.
In Edmonton, multi-family residential construction appears to be absorbing tradespeople as big construction projects, i.e. the Sturgeon Refinery, the Provincial Museum, Rogers Place and the Enbridge Tower are completed.
The number of new townhouses in the ‘burbs and condos downtown being built for young couples has jumped by some 5,000 units in 2017 – up 50% from 2016.
Despite the recession, Edmonton’s population keeps growing, thanks to more babies from our younger-than-average population, international migration (often joining relatives already established in Edmonton) and internal Alberta migration – the jobless from regional centres looking for work in the big city.
Still, vacancy rates in both apartments and downtown office space are alarmingly high. We’re not yet out of the woods.
Oil activity wakes up professional services (engineers, accountants, lawyers).
The public sector – teachers, health care, civil servants – keeps hiring.
The province keeps piling up debt to cover the ever-growing government payroll. But you, dear readers, don’t seem to care. The newest outside reports suggest a $71.1 billion provincial debt by 2019-20, costing $550 per Albertan in annual debt-servicing charges.
If debt servicing was a government department, it will soon be the fifth biggest for spending, after health, education, advanced education and community & social services.
Slowly, other sectors are diversifying – food processing is growing as an industry, global engineering/construction firms like PCL and Stantec have grown way past the energy sector. Our small but burgeoning financial sector – Canadian Western Bank, ATB Financial, Servus and AimCo – has weathered the storm.
Still, it’s mostly oil. When oil prices rise, the Edmonton economy starts to prosper. When they go down, I need not tell you the damage it does.
But, like the Oilers, there are so many factors, so many moving parts, so many unseens … and so much competition.
The truth of it? Nobody really knows if Metropolitan Edmonton will make the economic play-offs next year with 2.5% growth, win the Stanley Cup with 4% growth, or miss the play-offs altogether if oil drops back to under $50.
Hope for the best, work towards the best, but prepare for the worst.