UCP says Alberta on track to full employment by 2023

But critics say economic projections are based on overly optimistic assumptions

The UCP government is predicting Alberta’s economy will return to full employment by 2023, even as private forecasters suggest the jobless rate will remain high for at least the next four years and critics say the government’s oil price forecasts are overly optimistic.

In Thursday’s provincial budget speech, titled Getting Alberta Back to Work, Finance Minister Travis Toews said the province is on track to lead the country in economic growth over the next two years. He said he expects real GDP growth to rebound to pre-recession levels of 2.5 per cent this year (earlier Thursday, a Conference Board of Canada report called for 2.2 per cent GDP growth for Alberta in 2020) and then accelerate to an average of just under three per cent between 2021 and 2023.

The growth is expected to be driven by population growth as well as a rebound in capital spending by businesses, particularly in the energy sector. The government predicts that oil and gas production will grow by 170,000 barrels per day in 2020, and energy companies will spend an additional $1.5 billion in capital investment (in line with the forecast released in January by the Canadian Association of Petroleum Producers).

While the province’s unemployment rate currently sits at about seven per cent, the UCP expects that to reach 6.7 per cent by the end of the year and fall to pre-recession levels of 5.1 per cent by 2023.

“While there is much work to be done on the jobs front, there are reasons for optimism,” Toews said Thursday.

However, the government’s employment projections differ substantially from those previously released by banks and national forecasting agencies. For example, the government’s projection of a six per cent unemployment rate by the end of 2021 is more optimistic than eight other comparative forecasts, which vary from a high of eight per cent to a low of 6.2 per cent. Only RBC Royal Bank agrees with the Alberta government’s six per cent projection.

For 2023, when the government predicts pre-recession levels of 5.1 per cent unemployment, Stokes Economics is predicting the figure will be closer to 5.9 per cent. The Conference Board of Canada has predicted that, by 2023, Alberta will still be struggling with 7.7 per cent unemployment.

Critics say the UCP’S employment predictions are based on overly optimistic economic assumptions. The government is forecasting West Texas Intermediate crude prices to average $58 per barrel this year, unchanged from its October 2019 budget forecast.

However, conditions have changed since then — the coronavirus outbreak has spurred fears of a global economic slowdown and energy prices have been falling, with WTI trading in the $47 range Thursday.

University of Calgary economist Trevor Tombe said he finds many of the rosy forecasts in the budget — from employment to GDP growth to housing starts — “shocking.”

“And not because I know where things are going to go in the next couple of years, nobody really does, but because they (the government) didn’t change anything relative to

Budget 2019 in spite of big economic and fiscal changes in the environment that we’re operating under,” Tombe said.

NDP Opposition Leader Rachel Notley said Thursday that the 2020 provincial budget appears to be built on “wildly optimistic” forecasts for energy prices and economic growth.

“It rests on a make-believe framework of economic projections that most people know are not true,” Notley said in a news release.

A recent decision by Calgary-based Canadian Natural Resources Ltd. to increase its 2020 capital budget by approximately $250 million over 2019 levels, as well as chemical company Dow’s announced plans for a $200-million ethylene expansion project in Alberta were cited in Thursday’s budget as proof that the province’s economic turnaround has already begun.

The government is banking that its already announced plan to reduce the province’s corporate tax rate to eight per cent — one of the lowest rates in North America — in 2022 will trigger further capital investment and create jobs. According to the Canadian Federation of Independent Business, which praised Thursday’s provincial budget in a news release, 83 per cent of the province’s small business owners believe a lower corporate tax rate will benefit Alberta’s economy over time.

The government has also budgeted $75 million over the next three years for an Investment and Growth strategy aimed at identifying and attracting new foreign and domestic investment that will grow the economy. The strategy will be targeted toward priority sectors such as energy, agriculture, technology, aviation and logistics, finance and tourism — though few details were available Thursday.

While Toews acknowledged Thursday there are risks to the government’s economic projections — not just the coronavirus outbreak but also global geopolitical tensions and the possibility that approved pipeline projects will not be completed — he said he believes the government’s employment forecasts are credible.

“Our department, quite frankly, has a very strong track record — not only of revenue projection success, but also of employment projection success,” Toews told reporters. “Based on what we’re seeing here on the ground in the province, and signals around additional investment coming on stream, we’re confident we will see a gradual reduction in unemployment.”

While there is much work to be done on the jobs front, there are reasons for optimism. FINANCE MINISTER TRAVIS TOEWS