Gradually rising oil prices will help pull the economies of Calgary and Edmonton out of recession this year, according to The Conference Board of Canada's Metropolitan Outlook: Spring 2017.
"Following two years of declines, the tide is turning for Calgary and Edmonton. Oil prices have recovered somewhat from the lows reached in February 2016, and while energy investment in Alberta is expected to remain sluggish this year, oil production is set to rise. This will support growth in most major industries in both cities," said Alan Arcand, Associate Director, Centre for Municipal Studies, The Conference Board of Canada.
Calgary's economy is expected to grow for the first time in three years, with real GDP projected to expand by 2.3 per cent in 2017. This should allow the economy to add 8,800 jobs this year and an additional 10,100 jobs in 2018, reversing a decline in employment of 12,500 in 2016. The resumption of job growth will push the unemployment rate down from 2016's 22-year high of 9.4 per cent to 8.0 per cent by next year.
Slowly rising oil prices should be enough to aid Calgary's struggling energy industry, which has endured major head office layoffs over the past two years. But even though the energy sector will no longer subtract from growth, modest additions to payrolls won't aid the downtown core's very high office market vacancy rate, which reached 25 per cent at the end of 2016. It will take several years for all the available office space to be absorbed, and this will keep a lid on office market investment for some time. This, along with persistent weak residential investment, suggests that a recovery in Calgary's construction sector will be delayed until 2018. Indeed, housing starts are projected to fall to an eight-year low of 9,000 units in 2017, before a slow recovery begins next year.
Edmonton's economy will also benefit from higher oil prices, particularly its goods-producing industries. First, rising oil production will directly benefit Edmonton's resources, primary and utilities sector, which is forecast to post output growth of 6.3 per cent this year. This will help fuel a turnaround in the city's manufacturing sector, which is closely linked to the energy industry. Finally, Edmonton's construction industry is projected to bounce back from two consecutive annual double-digit declines, as activity surrounding non-residential and infrastructure investment projects more than offsets a third straight drop in housing starts.
The region's services sector is also set to improve starting this year. With employment and disposable income expected to rise, consumers should slowly increase spending. This will support modest growth in wholesale and retail trade, and personal services industry, which includes accommodation, food services, and arts, entertainment and recreation. Edmonton's public sector, which has acted as a bulwark against the energy sector downturn, is expected to continue to support economic growth over the near term, albeit with a more modest contribution.
In all, Edmonton's economy is expected to expand by 2.4 per cent in 2017, which should help generate about 5,700 new jobs, up from the paltry 170 new jobs added in 2016.
SOURCE: Conference Board of Canada
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.