Alberta's economic growth to moderate next year, economist
New residents will propel strong housing starts in 2013
Saturday, Oct 06, 2012 06:00 am
A world that resembles a messy burger should make Alberta tap the brakes on its economic growth next year, and that’s good news, says a prominent economist.
Recalling a meal he had recently at a restaurant that had no cutlery, ATB Financial senior economist Todd Hirsch said the global economy looks a lot like a hamburger chopped up with a toothpick – it’s messy, but it still works.
“The one thing we did not have at our table was a knife, a tool,” he said.
Hirsch delivered his message to about 180 people at Leduc’s Executive Royal Inn Thursday during the second annual Re-Envision Housing Symposium, organized by the Capital Region Board.
Central banks are also short on precision tools – interest rate cuts – in this economic slowdown (as most rates are already as low as possible), and have to turn to more blunt instruments like bonds to get the job done, he continued.
There’s also a heightened amount of instability in the world, he said. Europe’s recovery is mired in political indecision, while the U.S. looks set to tread water for years regardless of the outcome of its presidential election.
“It’s not going to be a pretty picture going forward,” he concluded, and Alberta can expect less growth in 2013 as a result. But faster is not always better, he added.
“For Alberta, a little bit of moderation … is just what we need.”
Jobs, homes still hot
Canada isn’t headed for a recession, Hirsch said, but with just 1.8-per-cent growth in the second quarter, it certainly isn’t growing at its potential. The problem is central Canada, he explained, which continues to have high unemployment due in part to the high dollar.
Some 586,000 people are now out of work in Ontario, according to a Statistics Canada report released Friday. This is more than in any other province. Alberta, in contrast, had the lowest unemployment rate in the nation at about 4.4 per cent (about 100,000 people).
“The energy economy is still king in Alberta,” Hirsch said. He predicted more instability in oil prices next year due to a slowing Chinese economy and unrest in Syria, but expected prices to stick around $80 to $95 a barrel. That’s a good place to be, he noted, as oilsands producers tend to halt operations if the price gets below $80.
Housing starts in Alberta peaked in April and have fallen ever since, Hirsch said in a later interview, but he believes they would bounce back next year.
Alberta’s hot job market has caused people to flood into the province at levels not seen since 2006, Hirsch said, and those people need homes. He predicted 35,000 to 38,000 new housing starts next year in the province. (There were about 26,000 starts in Alberta last year, according to Statistics Canada.)
Don’t expect a crash in house prices anytime soon, Hirsch added in an interview. Unlike Toronto and Vancouver, Alberta’s house prices are actually in line with the jobs and wages available here.
“Alberta’s housing market is very balanced and probably poised for some growth,” he said.
Alberta’s economy grew by about 5.2 per cent last year, Hirsch noted – good, but almost too good.
“That’s getting close to Chinese levels of growth,” he said, and it could create another labour shortage if it persists.
The good news is that, due to the global slowdown, Alberta’s economic growth should slow to about three per cent next year, Hirsch said.
“That’s almost exactly where you want it.”
Local governments should consider working on backlogged capital projects now to take advantage of these conditions, Hirsh said. Interest rates are low and are likely to stay low due to the global slowdown (which means cheap loans), but labour and material prices seem poised to rise next year.
Hirsch’s speech reinforces the need for St. Albert to get its 700 acres of industrial land developed, said Mayor Nolan Crouse.
“If the economy stays strong with that low unemployment … there’s going to be employment lands that need to be developed.”