Four years of dealing with COVID and almost a year of enduring Russia’s invasion of Ukraine have had profound global effects. The world continues to struggle with volatile energy supply, extreme inflation, food insecurity and material and labour shortages. Central banks have aggressively raised interest rates to specifically target inflation.

Data Highlights

In the first 6 months of 2022, Alberta’s average daily oil production set records at 3.6 million barrels, with oilsands making up about eighty-five percent of that output. Although countries are moving to renewable and low-carbon sources of energy, it will take decades to transition away from oil. Alberta Energy Regulator expects oil production to remain at peak levels out to 2031 (see Table S4.1 below).

In the third quarter of 2022, net migration into Alberta increased by a whopping 207% year over year – the highest increase on record (economicdashboard.alberta.ca). The lower cost of housing, high oil prices, lower taxes and well-paying jobs, along with Kenney’s ‘Alberta is Calling’ campaign, resulted in an outstanding interprovincial population boom, which is expected to continue throughout 2023. This is good news for Alberta’s construction industry.

Alberta is expected to finish 2022 with the highest provincial employment rate. Nationally, the employment rate for 2023 is expected to soften from 3.6% to 0.2% and to decline to -0.2% for 2024; however, Alberta is expected to see some employment growth out to 2024, leading the provinces (Statistics Canada).

On the Horizon

Energy companies, scarred from the oil collapse of 2014, have been cautiously guarding profits – capital investment has been significantly reduced with only a fraction of earnings being directed to capital expenditures. As companies have been paying down debt and improving operational efficiency, they are better able to tolerate future oil and gas volatility, while remaining profitable. The effect of supply chain and labour shortages, limited pipeline capacity and the transition to low-carbon renewable energy will continue to affect the industry.

Although oil prices have softened, oil demand is expected to remain strong through 2023 with respectable forecasts ranging from $80-90/barrel. The impending global economic slowdown and ongoing geopolitical events will persistently contribute to energy market instability over the next few years.

Danielle Smith’s conservative government has committed to investing $15 million over the next three years to strengthen support for Alberta’s apprenticeship and skilled trades. A strong labour force is dependent upon critical apprenticeship training to meet the demands of the future and replace aging workers. BuildForce Canada identified shortages of six certified trades over the next five years: Boilermaker, Welder, Glazier, Carpenter, Insulator and Powerline Technician.

The Canadian construction industry is expected to experience an average annual growth of 2.2% over the next four years. While Alberta endured persistent stagnant growth amplified by the pandemic, 2021 appeared to be the turning point. Construction picked up significantly and is expected to grow through to 2026, despite rising interest rates, inflation and the looming global recession.

Looking Forward

Canada’s expanding household debt-to-income ratio adds significant risk to economic growth. As interest rates continue to rise, it is getting harder for households to manage their budgets. Balancing the rising cost of housing, along with other debt servicing and living expenses will impact the aggregate consumption portion of GDP as consumers decide to forgo unnecessary purchases.

Although the recession is expected to be relatively mild, its effects will vary across the country. With increased energy production, elevated commodity prices, low-cost housing, strong job growth, high provincial migration and a substantial fiscal surplus, Alberta is expected to be the leader in provincial growth for 2023 and weather the economic storm much better than the rest of Canada.

Huge fiscal investments into lithium mining, carbon capture storage, hydrogen production and liquefaction, and decarbonization will expand Alberta’s economic diversification, responsibly grow the provincial economy and contribute to a greener planet. Pursuing sustainable and energy-efficient operational strategies will open the door to further economic growth through global trade, as countries align with responsible and reliable trading partners – a huge opportunity for Alberta!