Hicks on Biz: Expecting a decent 2018 by GRAHAM HICKS, first published Edmonton Sun, Dec. 30, 2017
You have to be careful, sticking your head out of the foxhole to gaze out on 2018.
The odds on said head being blown off are fairly alarming. Nobody ever gets this prediction game right.
But, fingers crossed, luck being with us, global events giving us tailwinds, 2018 should be a reasonably decent year for business, employment and quality of life in northern Alberta (for our purposes, Edmonton and everything north of Edmonton).
“Reasonably decent” is highly contextual.
For the province as a whole, the Alberta government’s forecasters are looking at a 2.5 per cent growth rate for 2018. Which will be less than the four per cent growth rate being left behind in 2017.
Don’t forget three big factors.
It’s terrific the economy did well this year, and will keep growing (hopefully) at 2.5% for 2018. But the previous two years were awful, a negative four per cent economic growth in 2015, and another negative four per cent growth in 2016. We have not caught up to where we were three years ago, when the provincial economy was turbocharged with $100-a-barrel oil.
The provincial numbers – 2.5 per cent growth for 2018 – are for all Alberta. Calgary is only now climbing out of a much deeper recessionary hole than was ever dug here in Edmonton. So Northern Alberta’s 2018 growth rate will likely be higher than the overall provincial growth rate of 2.5 per cent.
Edmonton is a government town. While public-sector health and education payrolls are similar in Edmonton and Calgary, most actual government workers are in Edmonton. In 2011 (the last year Statistics Canada has these statistics) the province had a direct annual payroll of $2.5 billion, which by now must be $3 to $3.5 billion – most of that fueling the greater Edmonton economy.
Premier Rachel Notley seems to be dimly aware she can’t keep spending money she doesn’t have. Her end-of-the-year interviews have been peppered with aphorisms like “compassionate belt-tightening,” “re-profiling” and “re-prioritizing.”
Government funding to post-secondary education and quasi-government agencies has already been cut. Selective layoffs are happening, usually by accelerated attrition, i.e. here’s a retirement package, because you will be retiring early, won’t you?
If “compassionate” belt-tightening reaches down to school and hospital levels, even the threat of public-sector layoffs will spook consumer spending, and Edmonton’s growth could be less than expected in 2018.
Genuinely exciting is the green-lighting of Inter Pipeline’s $3.5 billion propane-to-plastics plant outside Fort Saskatchewan, which will put thousands of skilled tradespersons back to work. We will know within weeks if a second such plant, in the same economic magnitude, will be built by Pembina Pipeline.
The provincial government is thinking about re-investing in a possible Phase II of the bitumen-to-diesel Sturgeon Refinery, just as that brand-new refinery’s Phase I begins to produce long-awaited diesel. If Phase II is a go, there’s thousands more skilled construction jobs.
And if all three projects are approved, the in-province workforce that made big money during massive construction in the oilsands will once again be fully employed.
Yes, the city’s economy is diversifying. One theme this column will pursue in the coming year is the impact of hundreds, if not thousands, of small Northern-Alberta based businesses selling specialized products world-wide – within and outside the energy sector.
One of the few economic indicators I trust is the current value of my Edmonton house – what the market is willing to pay if I put it up for sale.
The City of Edmonton’s annual assessment for property tax purposes is an accurate approximation of value. My house rose in value by 1.3 per cent from 2016 to 2017, by .6 per cent from 2015 to 2016.
Over the last 10 years, my home has risen in value by an average two per cent per year. From a purely financial point of view, it’s a lousy rate of return, barely ahead of inflation. Buyers are not flocking to Edmonton.
Which tells me our local economy, while reasonably decent, is still not in the greatest of shape.