‘Cracks in the armour’: report shows Alberta economy set to slow

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A Business Council of Alberta (BCA) report suggests that although the province’s economy continues to be a leader in Canada, the writing is on the wall for a slowdown to come.

“There are more kind of cracks forming in our armour and our economy’s armour. Certainly things are not falling apart, but there is some weakening across a couple of fronts,” said BCA director of policy and economics, Alicia Planincic.

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In its quarterly economic snapshot released Wednesday, the BCA broke down some of the key elements impacting Alberta’s economy. Pointing to shifting immigration, lower consumer demand, and a slower global economy, the BCA examines some of the headwinds expected to hit the province. Planincic broke down some of the key take-aways from the report, and what Albertans are making of the economic signals.

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Immigration-driven

In welcoming roughly 200,000 people in just a year, immigration quickly became the province’s single biggest economic driver. However, part of the strains coming to Alberta’s economy include changes to immigration.

“Most of our growth wasn’t just from people having more babies, or even people moving here from other provinces. It was international,” said Planincic.

With recent amendments to the federal government’s goals for immigration, international newcomers to Alberta is expected to slow after temporary residents accounted for nearly half of the province’s 4.1 per cent population growth.

“In the absence of that, Alberta is not going to look as good,” said Planincic.

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“That growth is going to be totally thrashed. I think the question is, how quickly?”

The BCA conducted a poll to hear how Albertans felt about the province’s economic outlook, which showed that 39 per cent of respondents felt it was “getting worse.” 20 per cent of respondents said they felt the province was “improving,” while 36 per cent said they thought Alberta’s economy was “neither” improving nor getting worse.

“There is some worry, and I don’t think that Albertans are crazy to have some concerns.”

Planincic was heartened by an accompanying poll which asked Albertans about their household’s financial state, in which 48 per cent of respondents reporter feeling “good,” while 37 per cent and 10 per cent felt “mid” or “bad,” respectively.

“We kind of just need to get through until interest rates come down in a way that’s really meaningful and affects individual households. So, I think that’s a good thing, is that we’re seeing resilience,” said Planincic.

High unemployment

“I think the labour market is really the clearest sign to me that our economy is weakening for a time.”

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BCA’s labour market analysis showed that for every job opening there are, on average, three applicants — a marked shift from just two years ago when the market had a balanced 1:1 ratio.

The employment rate also gave Planincic reason for concern. Sitting at 7.3 per cent, Alberta’s unemployment is the third-highest in Canada behind Prince Edward Island (10 per cent) and Newfoundland and Labrador (10.1 per cent). Planincic said the higher rate was largely accepted during the height of migration into the province as newcomers sought out jobs.

“Unemployment has stayed high for quite a while, and I think at this point, there’s really no charitable view of that,” said Planincic.

Job creation in Alberta has also slowed significantly from last year, dropping to just 0.4 per cent growth over the last six months from last year’s 2.3 per cent.

“Consumers aren’t spending as much locally.”

Amid a depleted job market, high unemployment, and a generally lowered faith in the provincial economy, the report shows decreased consumer activity.

“A lot of them are, frankly, burdened by higher debt loads, and just trying to make it work with more expensive mortgages and more expensive credit card bills,” said Planincic.

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It isn’t just local consumers that are spending less. According to Planincic, consumer demand from countries like China and the United States are down, which among other factors, indicates to her that the global economy is also slowing down.

As interest rates come down, Planincic expects that the Alberta economy will remain strong, but questioned what comes next for the country without immigration driving the growth.

“It seems like we’re going to make it through this cycle, and probably avoid a recession, and that’s great,” she said.

“Longer term, where does that leave us? What’s actually going to drive economic growth? I think that’s really the biggest concern. And how can Alberta help to support better economic growth?”

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