Market Update – Good things continue to happen in Alberta.  For several weeks now, we have been highlighting good news stories about Alberta’s economy.  I am starting to run out of new headlines.

The market seems to be staying busy going into the middle of November.  As I mentioned over the past few weeks, the relationship between supply and demand has changed over the last few months with the gap narrowing rather than widening.

Active listings in Red Deer number less than 500 for the first time since the summer of 2007.  Sales have not recovered to previous levels, but are certainly better than last year (up over last year by 20% in our MLS Board area). 

There is new confidence the Keystone pipeline will be approved which is very good news for Alberta.  It’s still not guaranteed of course.  Environmental groups are fighting it, but the reality is that our oil is going to be needed as conventional supplies dwindle.  The article below suggests that Alberta businesses are very confident about our future.

The Beat of Its Own Drum – Dan Sumner, Economist, ATB Financial – Indicators for economic activity in Alberta during the third quarter have come up roses so far, and this morning another sign the economy is humming along with wholesale trade rising to its highest level on record.

Alberta wholesalers brought in $6.13 billion in revenues in September, the highest amount on record and only the second month in history above the $6 billion mark. During September wholesale activity rose 2.0% and is up 12.1% from a year ago, the second largest gain of any province behind Saskatchewan (+22.5%).

After plummeting during the recession it has been a nearly straight line upwards for wholesale trade in Alberta (see graph). Activity in the sector is one of the few that has definitively regained its pre-recession peak (unlike manufacturing shipments exports and vehicle sales, for instance)

Wholesale trade gives an indication of purchases by businesses. If wholesale trade in Alberta is strong it means firms in the principle industries (energy, agriculture, forestry, retail etc.) are out there spending money and in turn expect their sales to grow.

Wholesale activity for the third quarter joins a host of other indicators (employment, manufacturing shipments, vehicle sales, building permits, housing starts and exports), which all show the Alberta economy picked up during Q3, despite all the turmoil in the global economy.

Alberta continues to shine!  Population growth, employment growth, construction starts are all beating the odds and going up when the rest of the world seems to be struggling to stay at an even keel.  Oil prices and activity in the oil patch are obviously what is driving this latest little surge.

Recent news that the US Government has postponed their decision on the Keystone pipeline may have a tempering effect on oil prices.  As production grows in the oil sands, the ability to get the oil to markets is critical.  Not having the Keystone pipeline limits the amount of oil that can be exported and may drive prices down as supply outstrips demand.  Obviously lower prices could cause a slowdown in our local economy, so we have to hope for a quick resolution to the pipeline issue.

Alberta Adding Jobs by Todd Hirsch, Senior Economist ATB  

While the rest of the global economy is bracing for a slowdown, Alberta remains a very enviable engine of economic growth.

Defying our expectations of a slight pull-back in the labour market, the provincial economy added 7,500 new jobs. This is the sixth consecutive monthly gain; compared to October of last year, Alberta employment is up 4.3%. The unemployment rate stands at a very balanced 5.1% (down from 5.4% in September).

This stands in sharp contrast with the rest of Canada, where this morning’s job report was very negative. Overall, the national economy shed 54,000 jobs—a far cry from the expectation for a gain of 20,000 jobs. Losses were concentrated in Ontario (-38,700), British Columbia (-10,800), and Quebec (-13,300). Canada’s unemployment rate ticked up from 7.2% in September to 7.3% in October.

While Alberta did add jobs over the month, they were virtually all in part-time work; full-time positions actually fell back by about 800 jobs. The new positions were dominated by gains in retail and wholesale trade (+11,600), oil and gas extraction (+8,800), and agriculture (+5,200). Losses were reported in professional, scientific and technical jobs (-8,000) and construction (-3,900).

The solid job gains in Alberta reflect an economy that continues to outpace the rest of the country. The province remains an island of growth, propped up by high oil prices, drilling activity and spending in the oilsands. The hit to Canada’s overall economy, however, will add to the level of worry at the Bank of Canada as the country continues to be weighed down by a souring global environment.

Market Update – Recent news cautiously suggests that the Alberta economy is improving.  Job growth and the resulting population growth, a more balanced re-sale housing market and now higher construction starts are all good indicators of that improvement.

An increase in construction starts is particularly good news since construction is one of the industries that drives our economy.  New construction not only creates a lot of jobs directly in the industry, it creates jobs and growth for the thousands of businesses that provide the materials, supplies and equipment needed.  Any improvement in construction starts will translate into a stronger economy in Alberta, and a stronger economy means a stable housing market.

Starts Pulse Higher – Dan Sumner, Economist, ATB Financial

Activity in the energy patch has had trickle down effects on many sectors of Alberta’s economy recently, but residential construction has remained slow. However, with data out this morning showing that housing starts notched higher for the second time in three months that might be changing.

Builders began construction on 28,400 (SAAR) urban housing units in October 2011, the second highest amount since March 2010. Residential construction has generally been quite subdued in Alberta over the past year (and really since the recession began) but in August and now October starts have climbed above the 28,000 mark.

The very weakest segment of Alberta’s residential construction market over the past three years has been condominium construction—weighed down by an oversupply of units started during the boom. However, it appears that the surges in both August and October were thanks to a rise in multiple dwelling starts (i.e. condominiums).

Edmonton appears to be the winner in October with multiple dwelling starts jumping from less than 300 in September to nearly 800 in October. Back in August a surge in multiple dwelling starts in Calgary was behind the jump.

With two months of data now pointing towards some life in Alberta’s residential construction market, the case for a pickup in construction activity is being strengthened. That said, multiple unit dwelling starts can be very volatile and there are certainly no guarantees the recent rise will be sustained into the New Year.

There’s always good news out there if you are willing to look for it, especially in Alberta these days.  In the last few years we’ve become adept at wondering when the other shoe is going to drop.  The media’s current fixation on issues in the US and Europe have some folks wondering when the next bad news will hit.

As everyone in central Alberta knows, the strength of our economy is highly reliant on the price of oil and gas.  There has been some speculation that oil and gas prices are bound to soften as the world economy slows.  A recent article in the Globe and Mail suggests that oil consumption in China is still growing and quotes the oil analysts at Barclays Capital in London who said “There is a large supply deficit in the global oil market, with demand exceeding supply in the third quarter”.

That suggests to us that there is a long term future for Alberta’s oil and gas and the jobs and healthy economy that come with it.

Manufacturing Shipments Perk-up in August – by Dan Sumner, Economist – ATB Financial

When Canadians think of manufacturing, they typically think of Central Canada. But Alberta’s manufacturing sector has grown in leaps and bounds over the past ten years and more recently has been an important driver behind the post-recession recovery.

Alberta manufacturers managed to grow their shipments 0.4% in August to $5.79 billion. Compared to August of last year, shipments are higher by 15.6%, the second largest year-over-year gain of any province (Saskatchewan has seen the largest at 17.1%).

While shipments were up marginally in August, they have been essentially flat for the last five months (see graph). However, this flatness comes on the heels of nearly straight gains from the middle of 2009 to Q1 of this year. Alberta’s manufacturing sector has also been an important job creation machine recently, adding more jobs than any other sector over the past twelve months.

Nationally the manufacturing story was quite positive in August, with shipments advancing by a higher than expected 1.4%. Canadian shipments have risen two months in a row now, partly a result of the unwinding of effects (supply chain disruptions) associated with the earthquake and tsunami in Japan.

This morning’s national release adds to the evidence that Canadian GDP growth will be positive in Q3, allowing Canada to avoid a technical recession (defined as two consecutive quarters of negative GDP growth).

With a healthy energy sector and rising oil sands production, manufacturing in Alberta should continue to grow in the long run. But in the near-term, shipments from this province will continue to be subject to swings in gasoline and oil product prices.