Alberta and the oil crash, 1 year later
12 months ago, oil was trading at $106 US a barrel. How has Alberta survived the crash, so far?
It's not exactly a happy anniversary for Albertans, but it was a year ago this week that the slide in oil prices began.
On June 20, 2014, a barrel of West Texas Intermediate sold for more than $107 US a barrel, a price that seems impossibly high now.
The decline was gradual at first, and it took a month before oil dipped below $100. Then came the OPEC meeting on Nov. 27 that caused the bottom to fall out of the oil market after the cartel said it wouldn't slash output to try to raise prices.
OPEC's decision to stand pat sent the oil market, which was already slumping due to oversupply, into freefall, with the price of WTI eventually bottoming out at around $42 a barrel in March.
Since then, Alberta's economy has been sending mixed messages. Tens of billions of dollars of energy investment has been cancelled. The energy industry collectively lost $600 million in the first three months of 2015. There are 25,000 fewer jobs in the oilpatch.
On the flip side, housing prices are stable, overall employment is up, and, for some reason, people are still moving to the province.
It raises the question — just what is going on in Alberta?
In the first three months of 2015, right in the depths of the oil crash, 9,000 people moved to Alberta, 8,000 from other parts of Canada.
It may not be the right time to be coming to Alberta, but it is not surprising to Robert Kavcic, a senior economist at BMO Capital Markets.
"It takes a little bit of time for people to respond to the shock," said Kavcic. "Even if you go back to the recession in 2008-2009, the economy was already starting to pull back pretty sharply in 2008, and you still saw inward migration. It wasn't until the middle part of 2009 that those flows turned negative."
The Alberta government points out that this is the slowest pace of in-migration since 2011. But if you reach back to the 2008-2009 recession, Alberta still had an overall influx of 13,000 people in the fiscal year, according to numbers from Statistics Canada. Perhaps old habits die hard.
Job market resilient
But did those migrants find jobs when they got here?
The first four months of the year showed that yes, they did, Alberta added jobs through April, just not in the energy sector.
The numbers seemed to show that as Albertans lost oilpatch jobs they found them in the service sector, or refashioned themselves as consultants and joined the ranks of the self-employed.
However, the situation varies depending on where you are in the province. In northern Alberta, unemployment is trending higher; the unemployment rate in Wood Buffalo, the municipality that includes Fort McMurray, is now 8.3 per cent, up from 4.2 per cent just this year.
Prince Owusu, a senior economist at the Conference Board of Canada, expects the second half of the year to be rougher for Albertans. He suggests that the first half of the year was harder on non-residents who travelled to Alberta to work.
"Our sense is that maybe the initial impact in terms of the job losses is due to the fly-in, fly-out workers. We don't have the numbers to support it, but that's where our initial inkling is leading us."
Activity in the housing market has slowed dramatically in Calgary — around 30 per cent so far this year. However, prices remain steady, according to numbers released by the Canadian Real Estate Board.
That might be about to change. Another housing price index, released by Teranet, shows that the average home in Calgary dropped by four per cent so far this year.
In Edmonton, both activity and prices are holding up better than in Calgary, perhaps because its workforce is not as focused on the energy sector as is Calgary's
Recession or no recession?
Many are asking, is the province in recession? It seems to be trending in that direction, barely.
The Bank of Montreal is forecasting a contraction of 0.2 per cent this year.
The Conference Board of Canada, after calling for a 1.5 per cent contraction, has now revised that to a 0.7 per cent contraction.
The provincial government, before it got booted from office in May, had been calling for growth of 0.4 per cent.
These are all similar in that they are rounding errors off what is essentially a flat economy. Which is still a pretty resilient showing for a province that will lose an expected $40 billion in investment.
So, while it's not exactly an anniversary worth celebrating, Albertans should take a moment to be grateful that the province has held up so well.
At least, so far.