Alberta's economy could get worse before it gets better

More Albertans could lose their jobs in the next few months with the unemployment rate expected to reach a 23-year high before things start to get better in the province’s economy.

But light at the end of the tunnel

Todd Hirsch Chief Economist ATB Financial

More Albertans could lose their jobs in the next few months with the unemployment rate expected to reach a 23-year high before the economy starts improving, according to ATB Financial Chief Economist Todd Hirsch. 

"Between now and probably mid-summer, I do expect that we will see more pain in the petroleum sector, more rounds of layoffs," Hirsch before a speech to the Edmonton Rotary Club Monday.

He said the effects are being seen during the current spring break-up. 

"A lot of those work crews just aren't going to be called back for the summer drilling season."

Hirsch added additional layoffs could push Alberta's unemployment rate to over eight per cent for the first time in 23 years.

But it isn't all bad news. Hirsch told the lunch crowd of about 70 people he expects things to begin to turn around by the end of 2016.

Oil to rebound by 2017

Hirsch is forecasting that the price of oil, which has been hovering around $30 a barrel, will be on the rebound by then. He predicts it could get back to around $50 a barrel early in 2017.

Hirsch forecasting oil prices to bounce back by 2017 (LM Otero/Associated Press)

One factor is Venezuela where he expects production to drop dramatically due to internal turmoil. 

"Venezuela is now on the brink of absolute collapse," he said. "Inflation is running at 800% in Venezuela. Their currency is essentially useless and when all of those things come together, it becomes very difficult for the country to physically produce and export oil."

While Hirsch is predicting more job losses, he doesn't see a housing crisis around the corner. He says mortgage rates are much lower than they were in the 1980s.

Home prices holding for now

A report released Monday by the Royal Bank of Canada showed that while home prices are remaining stable, sales are slowing down a bit.

"What we're seeing is listings and sales moving softer together which is why prices are still kind of holding up there but as we go forward I think the prices will soften moving through the remainder of this year." said RBC chief economist Craig Wright.

While the housing market seems to be holding, the number of people claiming bankruptcy in Alberta has jumped from last year.

New statistics from the Superintendent of Bankruptcy Canada show an increase of about ten per cent from 2014 to 2015.

(Mark Mennie/STARS)

271 Albertans went bankrupt in 2014 with that number rising to 383 in 2015.

"We knew the numbers were going up," said Rhonda Fox-Miles, a licensed insolvency trustee. "We knew they were going to go up because of the decrease in the oil prices and so many people that rely on the oil fields for their income."

More people are also applying to have their debt repayments re-structured.

All of this pain and uncertainty is impacting other areas. For example, Fox-Miles said people aren't going out to restaurants as much. 

And for the first time in 23 years, STARS Air Ambulance is in danger of not selling out its popular lottery, which awards prizes like luxury homes, vehicles and dream vacations.

"The downturn is affecting all of us." said Andrea Robertson, the president and CEO of STARS.

Charities feeling impact

The $11 million in proceeds from the lottery would fund one entire STARS base for one year.

STARS has bases in Edmonton, Calgary and Grande Prairie.

The lottery was 80 per cent sold as of Monday.

Robertson said while single tickets costing $25 had already sold out, the more expensive packages of $100 and $250 were proving difficult to sell.

As a result, STARS  is making more single tickets available in the run-up to its Mar. 23 deadline.

"Some things slow down, but emergencies don't," said Robertson, adding STARS flies five times a day and there's an increasing demand for its service.

Robertson said irrespective of lottery sales Stars will "Be there, no matter what."

While he's confident the economy will look more stable towards the end of the year, Todd Hirsch said even a jump to $50 a barrel is a low price for Alberta.

For investment to really come back to the oil patch, the price needs to be in the region of $70 a barrel and that's something that could take longer, he said. 

Hirsch said another silver lining is that it's doubtful people will begin to leave Alberta as happened in the 1980's, adding not many other places in Canada are doing well either.