Slower economic growth, weak consumer confidence, persistently high unemployment and a lack of job growth in higher paid industries summarizes the economic climate expected in Alberta this year. The primary cause of these conditions is continued weakness in the energy sector. While measures are in place to attempt to minimize the impact, relief is not expected until the end of 2019.
The economy is expected to return to pre-recession levels this year, but we are left with an economy and employment market that do not compare to the dynamics experienced in 2014.
Several sectors of our economy are smaller than they used to be. More people are working today than in 2014, but the type of employment has shifted, as there are fewer people employed in the energy sector.
One other change has been the relationship between economic growth and jobs. While the primary & utilities sector has grown due to more oil production, this has not translated into job growth, as over 31,000 jobs in this sector have not returned.
Concerns about weak demand growth and excess supply have emerged again in the global energy sector. This has caused many forecasters to downgrade their oil price forecasts for 2019. The Canadian market faces additional challenges with investor interest and pipelines. While some of the concerns regarding the price differential have eased, expectations for improvements in this sector in 2019 have mostly vanished, with optimism shifting to 2020.
A look at the energy sector in 2019:
- Government imposed production cuts and a ramp up of rail aimed to minimize oil price discounts and prevent significant job losses this year.
- Changes in government policies regarding the energy sector (e.g., Bill C69) could impact future growth prospects over the near term, as well as investor confidence.
- The future of Trans Mountain could help shift sentiment in the sector. Low natural gas prices are raising short-term concerns. However, progress on LNG Canada is boosting longer-term optimism and could lead to employment gains in the technical and professional business service sector.
- Regulatory changes, uncertainty regarding approval timelines and risk of stranded assets have made it increasingly difficult to attract investment capital into the Alberta energy sector. Lack of investment growth will limit employment opportunities.