Canada’s economic centre has been drifting west and economist Todd Hirsch offers 10 reasons why the west is winning.
It’s been ongoing for decades already, but the westward drift in Canada’s economic centre of gravity will gain even more momentum in 2011. Here are the top 10 reasons why.
10. Better fiscal environment. Saskatchewan is running a surplus. BC and Manitoba are close. Although Alberta is still running a pretty hefty deficit, the province is debt free and has plenty of savings. Ontario, on the other hand, is in some trouble. It’s not comparable to Greece, but big spending cuts and/or tax increases will eventually hit the province – and probably Quebec, too.
9. Agriculture. Crop farmers in western Canada may actually be smiling this spring. If moisture conditions hold up (and the snow pack this winter suggests they will), it could be a very good year for wheat, barley and canola growers. Prices are stellar.
8. More diversified exports. The western provinces are somewhat more oriented towards China, India and the emerging economies than provinces east of Manitoba. This is especially true in BC, which sent only 45% of its exports to the US in 2010 (compared with 80% from Ontario). Even the Prairie Provinces, with all their energy exports piped south of the 49th parallel, sent slightly less (78%) to the US.
7. The soaring loonie. The higher Canadian dollar will be a disproportionately painful kick in the face to central Canadian exporters whose bread and butter is the US market. The story is really not so much about the loonie but the depreciating US greenback, which will continue to decline.
6. Fort McMurray. The oil sands have generated more than their fair share of controversy and problems, but the largest engineering projects on the face of the earth have taken on a life of their own. That is lifting the fortunes of northeastern Alberta and the manufacturing heartland of central Alberta. For example, a new upgrader is set to be built near Edmonton.
5. Conventional oil drilling. Western Canada’s conventional oil drillers are also having a great year. Forecasts for wells drilled have been revised upward for 2011. Prices well above US$80 per barrel certainly help. But improved technologies in horizontal drilling – many of which were developed in Alberta – are giving new life and adding reserves to oil fields drilled decades ago.
4. Non-oil resources. Except for natural gas, almost all of Canada’s natural resources are enjoying high prices in 2011. That will boost activity in potash, base metals and even forestry.
3. Jobs, jobs, jobs. Through the recession, employment in Saskatchewan and Manitoba didn’t drop, and with the recovery in 2010, job creation has picked up. BC hit a soft patch post Olympics and Alberta suffered during the downturn, but unemployment rates across western Canada remain lower than in central or Atlantic Canada. That will help pull job seekers to the West.
2. Growing cities. They may not be the size of greater Toronto or Montreal, but western Canada’s urban municipalities are showing some of the fastest growth rates in the country. Saskatoon took the top spot as the fastest growing population in Canada, and two other western Canadian cities – Vancouver and Regina – placed second and third.
1. A global glow. With the surge in mergers, acquisitions and equity sales for Canadian energy companies, Calgary is gaining tremendously in global investment banking. According to a study by one large global financial player, Canada now ranks fourth in the world (behind the US, UK and Japan) in terms of generating investment banking fees. Toronto still accounts for the lion’s share, but the big growth has been in Calgary as players like Barclays Capital, Credit Suisse and Citigroup scoop up talent and office space.
All of this will put western Canada on top of the national growth chart in 2011 – and in an enviable position among most global economies.
Todd Hirsch is senior economist with the Edmonton-based ATB Financial.