2017 SHOULD BRING GROWTH TO ALBERTA, BUT SCANT JOBS
Troubling contradiction dampens enthusiasm for a healthier oilpatch
Jobless recovery.
These may be the scariest two words facing Alberta — and Calgary — as we turn the page on 2016 and move into a new year.
Across the province, there are hopeful clues the economic turmoil of the past two years is fading, but no clear indicators the lost jobs are coming back soon.
Over the past month, commodity prices have risen, oil pipelines have been approved and petroleum producers — such as Canadian Natural Resources Ltd., Husky Energy Inc. and Cenovus Energy Inc. — have hiked their capital spending budgets for 2017. And yet ... It will be years before pipelines are constructed, oil and natural gas prices are fickle, and producers aren’t adding staff after the painful downsizing of the past 24 months.
The new year could be defined by a troubling contradiction — economic growth without jobs — for a province that needs to get people back to work.
“We should all be very sanguine vis-à-vis the little bit of good news and little bit of optimism, whether it’s because of commodity prices or other things,” says Joseph Doucet, dean of the University of Alberta’s School of Business.
“There still is a lot of uncertainty that is going to affect the province.”
What is certain is that Alberta’s unemployment rate hit nine per cent last month, its highest level since July 1994.
Employment in the support activities for oil and gas producers — such as drilling and manufacturing — has been particularly battered, while the slowdown has spread to other parts of the economy.
Since the recession began, 46,000 direct jobs in the oil and gas sector have vanished, according to industry employment forecaster PetroLMI.
Several new reports highlight some of the pitfalls ahead for the province.
In its economic forecast, the Conference Board of Canada called for an end to Alberta’s recession and a return to growth in 2017. Yet it expects the employment rate per capita will fall by 0.8 per cent next year.
“We are not forecasting the high-paying jobs to come back very fast,” says associate director Marie-Christine Bernard.
A separate report by ATB Financial predicts the province’s unemployment rate will average 8.1 per cent next year — about the same as this year — before dropping to 7.7 per cent in 2018.
“I don’t know if I’d call it a jobless recovery, but the nature of the jobs are changing,” says ATB chief economist Todd Hirsch.
“If workers are just waiting for their old jobs to come back, yeah, it’ll be a jobless recovery. But if they are open to looking at other sectors that perhaps pay less, there will be opportunities.”
After two years of relentlessly negative news, it’s easy to become pessimistic. There will be areas of expansion and positive indicators are emerging.
The head of Calgary Economic Development foresees more local jobs in sectors such as tourism, agri-food, transportation and logistics, but fewer hires in the oilpatch than in the past.
“It’s an indication we’re going through a structural recession as opposed to a cyclical recession,” says CEO Mary Moran.
For the past decade, massive investment in the oilsands fuelled much of the provincial economic growth.
A report issued last week by PetroLMI noted the oilsands sector is only anticipating the recovery of 3,400 net jobs over the next four years, up about six per cent.
While some expansion projects are being reactivated, it remains to be seen when — or if — new greenfield developments will be given the green light.
The oilfield services sector is starting to feel slightly more optimistic as producers look to spend more money in non-oilsands areas, such as the Montney play, next year.
Companies such as Precision Drilling Corp., Trican Well Service Ltd. and Essential Energy Services Ltd. have even been adding staff recently for the winter drilling season.
“We’re not sure if we’re hiring longer term or just for the winter,” says Mark Salkeld, CEO of the Petroleum Services Association of Canada.
If there is a harbinger of better times ahead, it’s the news some producers are looking to spend more on drilling and exploration.
Peter Tertzakian of ARC Energy Research Institute is projecting that with higher commodity prices, the upstream oil and gas sector will see its cash flow levels more than double next year.
While oilsands spending is expected to slide by 18 per cent as larger projects wind down, nonoilsands capital expenditures are pegged to climb 38 per cent, to $28.3 billion.
In turn, the number of wells drilled is forecast to rise more than 40 per cent, to 4,698, as oil prices recover.
“If by June of next year we continue to see US$50-55, maybe even up to $60 a barrel, there will be hirings that will happen. So it is a confidence issue,” says Tertzakian, institute executive director. “Once the confidence returns, I think you’ll see the jobs come back.”
Confidence and momentum are two things in short supply today after the “lower-for-longer” environment of 2015 and ’16. Getting it back will be critical. The return of economic growth next year will be universally welcomed across the province, but the victory will seem hollow for many if it doesn’t come with more jobs for Albertans.