Ontario to benefit from pain in oilpatch
OTTAWA — With the bottom falling out of oil prices — and shaving Canada’s growth forecasts for this year and beyond — the markets are now waiting for the other economic shoe to drop: employment.
But while activity in the energy sector will be curtailed, and jobs eliminated, non-oil-dependent regions of Canada, such as Ontario, are expected to benefit from cheaper production costs and begin hiring more.
The initial impact of weaker crude prices — now at more than a 5 ½ -year low — should begin showing up in the December employment report, to be released on Friday by Statistics Canada.
“Eventually, as we move through 2015 — assuming the oil price stays low — it will start contributing to some weakness showing up in Alberta and Saskatchewan. But more on the construction side, rather than production,” said Paul Ferley, assistant chief economist at RBC Economics Research.
“This should also result in a pickup in manufacturing in Ontario, as well as provide a lift in Manitoba and Quebec.”
Finance Minister Joe Oliver, in his Nov. 12 economic and fiscal update, suggested the plunge in oil prices could cut government revenues by as much as $2.5 billion annually between 2015 and 2019.
That calculation was based on crude trading at around $70 US a barrel, although it has since fallen below $53.
Bank of Canada governor Stephen Poloz, meanwhile, said lower oil prices could slash 0.3 per cent off GDP in 2015.
Policy- makers are expected to update their estimate in the central bank’s next quarterly Monetary Policy Report on Jan. 21.
But Ferley said RBC is “not expecting a big hit to GDP, so on net, nationally, we’re not expecting a big hit on the overall (employment) numbers.”
Most economists expect next week’s jobs data to show a gain of about 10,000 positions for December, following a loss of 10,700 workers the previous month. However, the unemployment rate should remain at 6.6 per cent.
The federal data agency’s monthly household employment surveys are notoriously volatile, and include a large margin for error.