Oil recovery won’t mean more jobs for now, report finds

The oil price recovery won’t mean more jobs right away for unemployed workers in Alberta, Saskatchewan and Newfoundland and Labrador, says a new report.

In a provincial outlook published Tuesday, TD Economics said economic growth in Alberta and Saskatchewan will lead the country during the next two years, but “this will be bittersweet, as the job markets in these oil-producing economies are expected to remain soft.”

The outlook predicts that Alberta’s economy will grow by 2.1 per cent in 2017 and 2.3 per cent in 2018 — leading the country for growth in the next two years after posting the largest percentage declines over the past two years.

Saskatchewan’s real gross domestic product is also expected to increase next year by 1.5 per cent and two per cent in 2018, while GDP in Newfoundland and Labrador, another oil-producing province, is expected to decline 1.2 per cent in 2017 and rebound 0.8 per cent in 2018.

Rebounding economic growth in all three provinces, however, will not result in an immediate or significant rebound in job numbers.

“While there is light at the end of the tunnel for these provinces, it will take some time to filter through the job market,” the report noted. “Employment is a lagging indicator, and conditions in the oil producing regions appear to have deteriorated in recent months, with the unemployment rate shooting up in all three provinces.”

Energy companies have been increasing their capital spending plans as oil prices rise. CIBC analyst Jon Morrison said he expects capital spending across the industry to grow 40 per cent in 2017 compared with 2016 levels.

In recent weeks, Canadian Natural Resources Ltd., Husky Energy Inc., Cenovus Energy Inc. and Crescent Point Energy Corp.. among others, have announced capital budgets for 2017 that show increased spending next year. But none has announced plans to hire additional staff.

The oilfield services sector has laid off about 50,000 workers since mid-2014, according to the Petroleum Services Association of Canada.

TD Economics forecasts unemployment rates will actually increase in Alberta (to 8.4 per cent) and Newfoundland and Labrador (to 13.9 per cent) next year, while holding flat in Saskatchewan at 6.3 per cent. A small recovery in the job market is expected in 2018 for all three provinces.