ATB Financial chief economist Todd Hirsch predicts that this year will be a rebuilding year for the province after oil prices stabilize.
Hirsch spoke to a room full of local business people at a lunch hosted by the St. Albert Chamber of Commerce. Hirsch offered his predictions for the year to come.
Overall, ATB Financial predicts 2.1 per cent growth in Alberta’s GDP after a cumulative drop of around seven percent in the past two years.
Hirsch said that oil prices should stabilize between $50 and $60 per barrel over the coming year. Even though this price is much higher than the bottoming out of oil prices a year ago at $30, this price is still much lower than ideal.
These stable oil prices are not predicted to ease unemployment woes in the province.
“Although we see a lot of growth coming back to Alberta this year, and some optimism, it is going to remain a challenge for a lot of job seekers,” Hirsch said. “I think a lot of companies will be reluctant, especially in the first half of the year, to start hiring back a lot of people and that is going to keep that unemployment rate provincially probably around eight or nine per cent for a while longer.”
When the recession hit, it took around eight months for industries to begin laying off employees and Hirsch predicts that it will take just as long for them to begin hiring again.
The provincial unemployment rate for December hit 8.5 per cent. Last year saw the highest unemployment rates in Alberta since 1995.
Since the recession began, Hirsch said that job losses have come from primarily the sectors with high wages such as oil and gas, construction, manufacturing and the science and tech industries. These high paying job losses have resulted in overall wages being down by six per cent in the province, according to Hirsch.
Hirsch said the construction industry has seen growth slow significantly since the height of Alberta’s boom in 2014. New projects are down by 26 per cent since the peak in 2014, but construction growth is only six per cent lower than the 10 year average.
“I would call that slower than average but not dramatically slower than the 10 year average,” Hirsch said.
Some of the growth is coming from provincial and federal infrastructure spending in the province, which is acting as an offset to the lagging construction sector.
Residential construction is also down about 25 per cent from the peak two years ago, but it sits very close to the 10 year average. Hirsch said that home construction will stabilize with the economy.
Despite the slow recovery, the economic outcast is not all doom and gloom. Hirsch said that he is the most optimistic about the tourism and agriculture sectors.
Tourism in Alberta is coming off two consecutive record setting years of tourism spending and 2017 could be another record setting year. The Canadian dollar remains comparatively weak to where it was five years ago and the American economy is strong, which Hirsch said will help draw visitors from south of the boarder.
Canada’s 150th birthday will also bring in foreigners, according to Hirsch, and free admission to all national parks have set up for another record-breaking year for tourism.
“Almost everything is aligning very nicely for tourism in 2017,” Hirsch said.
Hirsch is optimistic about the agri-food and food processing sector as there has been a dramatic increase in the industry in Alberta in the last 10 years, which is shown by the significant increase in farmers’ markets across the province.
“I think there is an enormous opportunity for Alberta and our niche producers to really gain some market share,” Hirsch said.
Although the changes in some industries are easy to predict, Hirsch still said there are many unpredictable factors that could effect the economy in 2017.
International politics may play a large role in the economic forecast in the coming year. American president-elect Donald Trump has taken an anti-trade stance, but has surrounded himself with a pro-energy sector that has spoken favourably about the Keystone XL pipeline. But Hirsch said that his platform hasn’t specifically addressed Canada and it is difficult to predict how his policies will affect the Canadian economy.
