Recession could last a year: ATB

ATB Financial expert says recession in Alberta could last 8- 12 months

ATB Financial’s chief economist is scaling back his outlook for the Alberta economy, forecasting a recession for 2015 and warning a turnaround could be a year away as oil prices remain low.

“It is probably going to be another eight to 12 months of pretty tough sledding for Albertans,” Todd Hirsch said Thursday during a news conference announcing the bank’s fourth- quarter outlook.

With oil price instability continuing to dominate the provincial outlook going into the fourth quarter, it sees Alberta in a recession for 2015 with a 0.7 per cent contraction of real GDP, a more pessimistic view than in early July when the bank expected growth of 0.4 per cent for the year. That compares with real GDP growth of 4.4 per cent in 2014.

“The situation actually has changed pretty dramatically," said Hirsch, whose updated forecast calls for economic growth of 1.4 per cent in 2016 and 1.8 per cent in 2017. In its previous outlook, ATB expected growth of 1.8 per cent in 2016 followed by 2.3 per cent in 2017.

The fourth- quarter report released Thursday said the price of benchmark West Texas Intermediate crude should stabilize at $ 45 US to $ 50 US a barrel for the remainder of 2015, with a moderate increase to $ 55 US-$ 60 US by mid- 2016. The November contract for WTI closed down 35 cents at $ 44.74 US a barrel on Thursday.

The price of oil was around $ 60 US when ATB made its last forecast in July.

The latest report said the oil and gas sector, along with the category labelled professional, scientific and other — which includes engineers and geologists — has suffered significant job losses.

Employment in resource extraction is down by 22,000 while jobs in the professions are down 16,100, it said.

Employment in other industries, including transportation and warehousing, education services, health care and social assistance has grown by more than 11 per cent over 2014, it said, with total employment across all sectors up a respectable 41,000.

“We are still assuming, or we are at least anticipating, that those other non- energy sectors in Alberta will do well next year. Those are the famous three that I talk about all the time — agriculture, forestry, tourism,” said Hirsch. “I think all three of those, in a lot of ways, benefit when oil prices are lower.”

The ATB report said the province’s unemployment rate would rise from 4.7 per cent in 2014 to 5.9 per cent this year before falling to 5.7 per cent in 2016 and 5.3 per cent in 2017.

“We are going to see a higher level of unemployment and that does present a lot of challenges for a lot of Albertans and there is going to be some hardship,” Hirsch said.