PLANT

OPINION: Alberta's employment picture is starting to improve


March 18, 2010
by TODD HIRSCH

It’s always fine for economists to say the recession is over and the economy has started to grow again. The latest word from economists is that Canadian GDP growth in the last three months of 2009 was strong and there has also been an increase in exports and business confidence.

But all this cheerful economic chatter can leave the average Joe on the street a little jaded when he still can’t find a job. What recovery, he may reasonably grumble.

The grumbling may now get a little louder because on March 12 it was announced that Alberta’s economy shed nearly 15,000 jobs in February. That comes on the heels of losses in January as well. The unemployment rate eked back up close to 7 per cent. So far, 2010 has gotten off to a truly lousy start for the province’s job seekers.

What can Albertans expect for the job market this year? Despite the employment setbacks in January and February, there are still solid reasons for optimism that the situation will turn around soon.

For one thing, energy prices (specifically, crude oil) are much better and continue to improve, which will lead to a rise in drilling activity for conventional oil and give an added boost to investment and manufacturing activity around the oil sands.

Anecdotal information also suggests such activity is indeed heating up: there are even stories about drilling service providers having a hard time trying to find workers (although it is unclear how wide-spread this problem is). The changes to the royalty regime announced by the provincial government may also help give the sector a boost. For its part, the government is suggesting that these changes will add 8,000 jobs in 2011-12 and 13,000 more jobs annually across the economy thereafter.

Secondly, with the gradual improvements in drilling activity, jobs in the business and personal service sector should start to come back. Compared to a year ago, total employment in trade and professional services (many of which are directly dependent on sales to the energy patch) is down by almost 30,000 jobs, victims of the collapse of energy prices in 2008 and 2009, and the resulting slide in drilling activity. But these jobs could start reappearing in the spring with the improved drilling activity.

Finally, we can expect the job market in Alberta to improve in the retail and wholesale trades sector (an area which did, incidentally, see big job losses in February). Alberta’s retail sector is down but not out. Compared to 2008, shoppers in the province are spending close to 10% less—a result of rising consumer anxiety and job insecurity.

But now that economic conditions have stabilized and are starting to improve, consumers will need to replace a lot of personal and household items that they’ve been holding off on purchasing for the past 18 months. It’s what economists call “pent-up consumer demand.” At a certain point, that dishwasher or pair of jeans or sofa set will need to be replaced. This year will probably see a rebound in retail sales activity.

But there will be drawbacks to the labour market as well. The strong loonie—soon to reach parity—will hamper Alberta exporters and tourism operators. Jobs and wages in the public sector could be flat-lined for awhile as the province deals with the deficit. Rising interest rates later in the year may take some wind out of residential construction. And natural gas prices will probably remain very weak.

Economic history shows that employment data are “lagging indicators” of general economic activity. That is, it takes about six months for improvements in the economy to show up in rising employment. Logically, if employers were forced to lay off workers during the downturn, they may be reluctant to start rehiring until they’ve seen several months of good, solid orders coming through the door.

So while it may not be smooth sailing for job seekers in 2010, general conditions are moving in right direction. Overall, Alberta’s job market is set to expand this year—it’s just off to a bad start.

Todd Hirsch is a senior economist at Edmonton-based ATB Financial, a Crown corporation that extends financial services to Albertans. E-mail thirsch@atb.com. This column is distributed by Troy Media Corp.