Increased drilling activity expected to boost jobs
It’s always fine for economists to say the recession is over and the economy has started to grow again. The latest word from economists is growth in Canada’s gross domestic product in the last three months of 2009 was strong and there has been an increase in exports and business confidence.
But all this cheerful economic chatter can leave the average Joe on the street a little jaded when he still can’t find a job. “What recovery?” he may ask.
The grumbling could get a little louder because in March it was announced Alberta’s economy shed nearly 15,000 jobs in February. That came on the heels of losses in January as well. The unemployment rate eked back up close to seven per cent. So far, 2010 has gotten off to a truly lousy start for jobseekers in the province.
Reasons for optimism
What can Albertans expect for the job market in 2010? Despite the employment setbacks of January and February, there are still solid reasons for being optimistic the situation will turn around soon.
For one thing, energy prices (specifically, crude oil) are much better and continue to improve. That will lead to a rise in drilling activity for conventional oil and give an added boost to investment and manufacturing activity around the oil sands.
Anecdotal information also suggests activity is heating up — there are even stories about drilling service providers having a hard time finding workers (although it is unclear how widespread this problem is).
The changes to the royalty regime announced this week by the provincial government could also help give the sector a boost. For its part, the government is suggesting these changes will add 8,000 jobs in 2011-2012 and 13,000 more jobs annually across the economy thereafter.
Secondly, with the gradual improvements in drilling activity, jobs in the business and personal service sector should start to come back. Compared to one year ago, total employment in trade and professional services (many of which are directly dependent on sales to the energy patch) is down by almost 30,000 jobs, victims of the collapse of energy prices in 2008 and 2009, and the resulting slide in drilling activity. But these jobs could reappear this spring with the drilling activity.
Finally, we can expect the job market in Alberta to improve in the retail and wholesale trades sector (an area, incidentally, that saw big job losses in February). Alberta’s retail sector is down but not out. Compared to 2008, shoppers in the province are spending close to 10 per cent less — the result of rising consumer anxiety and job insecurity.
But now that economic conditions have stabilized and are starting to improve, consumers will need to replace a lot of personal and household items they’ve been holding off on purchasing for the past 18 months. It’s what economists call “pent-up consumer demand.” At a certain point, that dishwasher, pair of jeans or sofa set will need to be replaced. This year will probably see a rebound in retail sales activity.
But there will be drawbacks to the labour market as well. The strong loonie — which is likely to reach parity sometime soon — will hamper Alberta exporters and tourism operators. Jobs and wages in the public sector could be flat-lined for awhile as the province deals with the deficit. Rising interest rates later in the year may take some wind out of residential construction. And natural gas prices will probably remain very weak.
Economic history shows employment data is a lagging indicator of general economic activity. That means it takes about six months for improvements in the economy to show up in rising employment. Logically, if employers were forced to lay off workers during the downturn, they could be reluctant to start rehiring until several months of good, solid orders coming through the door.
So while it may not be smooth sailing for jobseekers in 2010, general conditions are moving in the right direction. Overall, Alberta’s job market is set to expand this year — it’s just gotten off to a very bad start.
Todd Hirsch is a senior economist at ATB Financial in Edmonton. For more information, visit www.atb.com.
