K-shaped recovery in store for Alberta, ATB's economic outlook predicts
2021 could be 'roaring ‘20s' for higher-wage earners but challenging for those with lower incomes
Alberta's post-pandemic economic recovery could feel like the roaring '20s for higher-wage earners but remain a challenge for those with lower incomes, ATB's newest Alberta Economic Outlook predicts.
Released Thursday morning, the analysis forecasts the province's economy — which was bludgeoned by COVID-19 shutdowns and crashing oil prices in 2020 — will experience GDP growth if the pandemic is "largely quelled" by the fall and demand for oil continues to rally.
But ATB's prediction of a K-shaped recovery for Alberta means that some industries are expected to rebound while others will be left behind.
"If we think of that upper branch of the letter K, those are businesses that didn't have to close during the pandemic and workers who didn't lose their job," Rob Roach, ATB's deputy chief economist, told the Calgary Eyeopener on Thursday.
"That group of Albertans are in a pretty good position as the economy reopens ... [but] unfortunately, we have the lower branch of that letter K, and that's businesses that either had to partially close, maybe still are closed or had to permanently close, and a lot of low-wage workers."
GDP growth expected if assumptions play out
ATB's forecast hinges on Alberta's staged economic reopening, and that "U.S. and global demand for oil will continue to recover and that OPEC+ producers will maintain limits on the amount of supply they add to the market."
With these two variables in play, ATB expects Alberta's GDP to grow by 4.1 per cent in 2021 and 2.6 per cent in 2022.
With prices already trending upward for the first three months of the year, Alberta's oil patch is also forecast to have a "much better" 2021 if current conditions endure.
Capital spending is expected to be three per cent higher than in 2020, but will still be 31.5 per cent below where it was in 2019.
The resale housing market is also expected to continue gathering steam — though modestly, and "weak population growth" is expected to limit new residential construction.
Alberta's tech sector, agriculture and agri-food industries are poised to grow in 2021, with Infosys and mCloud Technologies Corp. both choosing to expand into Calgary and as setbacks in the cattle industry have eased with the pandemic.
"The big highlight is that we are growing again, and the title of our economic forecast is 'on the mend,'" Roach said.
"And I think … 2021 is going to be a much better year than 2020, but we're not fully healed. We still have a lot of recovery still to come. So we're going to have to be patient before we get to where we really want to be."
'A big issue going forward'
In spite of being "on the mend," the possibility remains for a large number of businesses to shutter in 2021, the outlook says.
Though job growth of 3.6 per cent is expected this year, the unemployment rate is also anticipated to remain high, due in part to new people entering the labour force.
Those with higher incomes who were able to continue working during the pandemic are likely to release pent-up demand for consumer goods and services in Alberta.
Meanwhile, sectors hardest hit by the pandemic such as tourism, hospitality and restaurants will bounce back, but relative to the losses of the last 18 months.
"Even though [those sectors are] going to be picking up growth … we're not there yet," Roach said.
"The economy hasn't fully opened. If you're a tourism operator or a large event operator, things are not even close to back to normal. So they're the ones who are going to be struggling."
Low-income earners who were struggling before the pandemic are likely to face few employment opportunities — and even chronic unemployment — due to jobs that won't return and with emergency government relief programs that are winding down, ATB said.
"Because this was happening before the pandemic, whether it's automation and just changes around the economy, low-wage jobs are not going to be in demand," Roach said.
"And that's going to be the challenge for those workers, and that, I think, is the big issue going forward."
With files from the Calgary Eyeopener and Peter Armstrong