Wednesday, December 28, 2011

ALBERTA...THE REVIVAL


Energy revival fuelling boom
Province set to regain status as national leader
By Tamara Gignac
Calgary Herald December 27, 2011

Albertans know all about the B-word: boom.

For much of the past decade the economic pace was blistering, led by massive projects in the oilsands. The result was scores of high-paying jobs, a red-hot real estate market and an influx of thousands of new migrants.

The party was good while it lasted.

But in 2008, Albertans were blindsided by another B-word: bust.

A collapse in energy prices, the result of the U.S. financial crisis, took the steam out of Alberta's once-buoyant economy.

The oilpatch shelved or cancelled billions of dollars worth of projects, jobs evaporated virtually overnight and ordinary Albertans struggled to pay their mortgages.

But after sputtering for much of the past three years, Alberta appears poised to regain its position as Canada's economic juggernaut.

All signs suggest prosperity is sweeping the province. Unemployment is low, cash registers are ringing and the energy sector is once again on a hiring spree.

It begs the question: is Alberta headed for another overheated economy?

Economists are certainly bullish when it comes to the province's prospects.

The Royal Bank of Canada predicts Alberta's rate of growth - four per cent this year and 3.9 per cent in 2012 - will outpace all provinces except Saskatchewan.

"Oilsands megaprojects will continue to generate tremendous economic activity and will be a boon to Alberta's economy for years to come," says RBC chief economist Craig Wright.

"The boom entirely emanates from the private sector - the source of an astounding 116,000 new jobs this year," Wright said.

Improved employment prospects have translated into a record quarter for Sharlene Massie's local recruiting firm, About Staffing.

Alberta is bucking the national trend, a welcome relief from the hiring freezes of recent years.

As long as there's continued growth in oilsands production and Alberta's unemployment rate holds steady at about five per cent, the good times should continue, Massie says.

But she admits the spectre of an overheated economy could spoil the party and usher in a labour shortage similar to that of 2006.

In the worst-case scenario for employers, Alberta's jobless rate would return to levels seen in the last boom, driving skilled and unskilled wages to unprecedented levels.

"We're not there right now. We're comfortable," Massie says. "There's enough jobs out there and every-body's happy. Let's hope we can stay this way."

A report this year warned that a looming labour shortage is the Achilles heel of the provincial economy and that industry should brace for a chronic scarcity of workers in the years ahead.

It comes as Calgary's oilpatch, and the rest of the natural resources sec-tor, is set to lead the nation with the highest projected salary increases in the year ahead.

But boom or bust, Alberta's shifting demographics will probably require a new approach to labour issues in the coming years, suggests Calgary Chamber of Commerce CEO Adam Legge.

The province has repeatedly looked to the federal government to change immigration policies so Alberta can hire the workers it needs.

There's expected to be a short-age of everything from tradespeople and health-care workers to financial service employees, retail staff and public-service jobs.

"We're going to face a labour shortage whether we have a strong economy or not because there aren't enough workers to backfill the retiring baby boomers," says Legge.

He says he believes inflation pressure associated with rising labour costs could prove troublesome for Alberta.

"As soon as you see wages being driven up - as they are right now - people have more spending power and are able to bid up prices on everything from houses to goods and services," Legge says.

"The Bank of Canada will want to keep an eye on Alberta because we will have stronger inflation in our economy than the rest of Canada."

A heated labour market is only one indicator of Alberta's changing economic fortunes.

Figures from Statistics Canada show a three per cent increase in retail sales in October compared with the month before - the largest increase in Canada.

It comes as more Albertans purchase new vehicles, electronics and clothing - a welcome prospect for retailers, who saw cash register receipts dwindle during the recession.

Discretionary spending is also on the rise in the province.

Recent reports suggest people are choosing to dine in restaurants more frequently, purchase a morning latte or even fly away on a holiday.

Alberta's housing industry also got a much-needed boost in 2011.

"The strength in our economy, combined with affordability levels that outperform most major centres, will continue to attract migrants to the city and spur further growth," says Sano Stante, president of the Calgary Real Estate Board.

But along with an economic boom comes social challenges, as cities and smaller communities struggle to meet infrastructure pressures caused by an influx of new workers.

Todd Hirsch, senior economist with ATB Financial, says he doesn't expect to see a repeat of 2006, when "people lived in tents by the river" due to lack of affordable housing.

"I think you can call this a 'mini-boom,' at least relative to everywhere else in the country and even the industrialized world," Hirsch said.

"(But) if we did see a major collapse in Europe or a real calamity, that could knock the stuffing out of oil prices pretty quickly."

Hirsch is keeping an eye on developments with the Keystone XL project. The $7-billion Alberta-to-Texas pipeline proposed by TransCanada Corp. has been held up by a political battle in Washington.

The fate of Keystone XL could be a "harbinger of a more challenging environment" for Alberta's energy industry, he says.

"My feeling is this is not just one project we're talking about. It indicates we are in a whole new world in which putting pipelines in the ground is not going to be as easy or straight-forward as it was in the past."

So far, the province's fortunes have been mostly insulated from global economic turmoil relative to other regions.

But some observers, like Leonard Waverman, wonder if sluggish growth for Alberta's biggest trading partner - the United States - will eventually hit home.

The dean of the University of Calgary's Haskayne School of Business chooses a weather analogy to characterize Alberta's economic prospects in 2012.

"I'd suggest we have an economic chinook," Waverman says. "One must remember that chinooks are very capricious. They come in and move out very quickly."

But even as Alberta prepares for a new round of prosperity and good times, some still struggle to make ends meet after the recession.

During the past three years, Alberta recorded the country's second-highest increase in food bank usage, according to a recent HungerCount survey.

Talk of an economic boom is probably meaningless for the many house-holds still trying to find a way out of the last economic bust, says Kathryn Sim, a spokeswoman for the Calgary Inter-Faith Food Bank.

"We're seeing people bouncing back and they are coming to us as donors, which is lovely to see," she says.

"But it's hard to dig out of the hole. It's taking a longer time for people to get out of the situation they found themselves in when the economy crashed."

Photo By: Larry He's So Fine

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