Provincial cuts an ‘accident waiting to happen,’ says city economist

Provincial budget cuts to combat the falling price of oil is an ‘accident waiting to happen’ according to John Rose, Edmonton’s Chief Economist.

Edmonton set to weather economic shortfall better than the rest of the province

RAW: City economist on Edmonton's financial future

8 years ago
Duration 1:09
Edmonton's chief economist John Rose’s projects consumer spending will carry the city through the tough oil times.

Provincial budget cuts to combat the falling price of oil are an ‘accident waiting to happen,’ according to John Rose, Edmonton’s Chief Economist.

Yesterday, Alberta’s finance minister warned the province will have to cut its spending by about nine per cent and run deficits to deal with its budget woes.

Rose said cuts to the public sector will have a significant effect on Edmonton’s growth, as 22 per cent of the city’s employment comes from health, education and public administration.

“It's not just going to be provincial government employees losing their jobs. It's going to be health care workers, its going to be teachers, teachers’ aides,” he said.

“If they cut back on things like the municipal sustainability initiative, you're going to see cutbacks in our capital spending at the city, so it would be a very messy situation.”

Rose is calling on the government to give up its reliance on oil revenues.

“I think we need to have a grown-up conversation about consumption taxes,” he said.

Capital city employment could suffer

Rose predicts unemployment will jump to as much at 6 per cent by the end of the year, the highest its been since 2010.

“It’s going to hurt,” he said.

Rose said he hopes cuts don’t hurt consumer confidence, as Edmonton’s relatively high wages and continued spending could push the city through these tough economic times.

“If we see consumer confidence falter — that would be a very negative sign because we’re not going to be able to rely on ... public sector spending.”

The Alberta Union of Provincial Employees said across-the-board cuts would be devastating, as front line workers are already stretched to the limit.

“I urge Premier Prentice to re-evaluate what he’s planning and consider more equitable options,” President Guy Smith said in a statement Thursday.

“Trying to balance the government’s books on the backs of average Albertans is unfair and, frankly, unnecessary.”

Post-secondary institutions fear more budget cuts and layoffs as well. They took a five per cent cut only two years ago.

Doug Short, President of the Alberta Colleges Institutes Faculties Association said post-secondary institutions are still recovering from those cuts.

“We've tightened up over the last couple of years, the ramifications of that are continuing to have an effect throughout the system,” Short said.

Edmonton won’t tank with the price of oil

Despite the gloomy financial forecast, Rose said Edmonton is not likely to suffer a recession.   

He said he thinks Edmonton will fare much better than the rest of the province while oil prices are down, as the capital doesn’t do much business with the oil industry.

That could change if the price of oil does not bounce back.

“If we're talking about $50 barrels of oil at this time next year, all bets are off,” Rose said.

Mayor Don Iveson said the downturn in the price of oil has hit the city, but it could be worse.

“I know that people are making predictions about Alberta,” he said.

“But our prospects are still very good. We're a diversified economy and there's a lot of economic activity that's going to continue in spite of the downturn.”

Iveson said while he expects job losses ahead, overall Edmonton's economy is still strong.

“There's definitely going to be families affected by it, and business affected by the downturn … but Edmonton is still in a very resilient position.”

Rose will release an updated economic forecast in April after he has studied the impact of the provincial budget.

With files from CBC's Laura Osman and Kim Trynacity