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.

Just like we’ve been saying, things in Canada are very good compared to
the rest of the world, at least according to the ordinary Canadians in the
survey results below.   The sense of comfort we have with our current
economic conditions contributes to a healthy housing market.

Folks who believe the economy is good or very good invest in homes,
invest in their businesses, hire people, do research and development to improve
their businesses, and all those things are what contribute to a healthy
economy.

Canadians Think Economy is OK – Todd Hirsch, Senior Economist,
ATB Financial

A quick scan of recent international business news headlines suggests much more worry than optimism, and that worry is reflected in a global survey of attitudes.
Canadians, however, stand out with relatively upbeat attitudes.

IPSOS’s “Global
Economic Pulse” is a survey of participants in 24 countries around the world,
assessing the current economic situation in each country. The survey was
conducted between September 9th-19th.

In Canada, 66% of survey participants judged the Canadian economy to be
in GOOD or VERY GOOD shape at the moment. That puts us in #4 spot globally,
behind Saudi Arabia, Sweden and India. Canada outperforms such economic
hot-spots as China, Germany and Australia. On average, only 39% give their
country such a positive assessment.

Canadian attitudes
stand in sharp contrast to those of our American neighbours, where only 15%
believe the economy to be in good or very good shape. (See graph for top 10 and
bottom 5 countries).

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.

It’s Time to Invest in Real Estate – The story below about the Alberta job market is a signal that now is a good time to invest in real estate.  When jobs are being created, new people start moving here and many of them will rent for a year or two while they get established in their new jobs and maybe sell a home where they came from.

Buying a townhouse, duplex or single family home to rent out is a manageable proposition for many families and may end up being a more stable investment than the currently very volatile stock market.

The ingredients to a successful investment are all out there right now – ample supply, relatively low prices and low interest rates.  Interest on any money borrowed to buy rental properties is deductible against the income and any profits realized by a gain in value are taxed at the lowest rate as capital gains.  The best part… the tenants will pay off your mortgage over time, leaving you with a valuable asset and a long term, stable income.

 Alberta Jobs Story Keeps Getting Sweeter – Dan Sumner, Economist – ATB Financial

Over 2011, Alberta’s job creation figures have impressed even the most optimistic observers. And according to data out this morning, the jobs picture just keeps getting better and better.

Employers in this province added a further 8,600 net positions to payrolls in September, the fifth consecutive month of positive job creation. The last time Alberta saw job gains for five consecutive months was in mid-2006. The unemployment rate also declined in September to 5.4%, matching its low mark of the current economic cycle.

Digging below the headlines, the data was even more interesting. The number of full-time jobs expanded by a stunning 21,400 positions and was offset by a loss of 12,800 part-time positions. The mighty oil and gas extraction category was the largest gainer, adding 10,600 positions in September. Although the gain is impressive, it really just reverses a loss of roughly the same number of jobs the month before, which means the gain is partly related to problems with seasonality in the data.

Nationally the jobs report was similarly positive, with Canadian employment rising by 61,000 positions and blasting through expectations of a gain of 15,000. The upbeat news on the labour market probably couldn’t come at a better time, and serves as a bit of an anchor of hope in this uncertain global economic environment.

Moving forward, it is highly unlikely that Alberta’ labour market is going to be able to keep churning out jobs the way it has in the first three quarters of 2011. Nonetheless, if fears surrounding a European financial crisis and/or US recession are realized, Alberta’s labour market will be entering that period in a strong position.

Central Alberta Market Update – Sept 30, 2010

We’ve seen lots of good economic news in Alberta this year and it’s evident in an improved real estate market in central Alberta.  MLS sales from Jan 1, 2011 to Sept. 30 for the area served by the Central Alberta Realtor’s Association are up over the same period in 2010 by 18.27% and that number is generally reflected in most of the municipalities we service with the exceptions of Sylvan Lake (0% change) and Lacombe (+8.4%).

The biggest reason for the improvement lies in the population growth identified below.  People go where the jobs are and Alberta seems to have the best job creation record in the country at the moment.

While sales are up, the relationship between supply and demand hasn’t improved enough to cause prices to change.  In fact, prices could be down a little at the middle to high end of the price spectrum since last year.  Supply and demand balances vary by price range and the low end of the price spectrum is much closer to balance than the high end.

Growing Population – ATB Financial – Weekly Economic Bulletin – Sept. 30/11

Alberta’s population numbers shot up in Q2 2011, according to new Statistics Canada data released this week. The overall provincial population grew by 0.59% in the second quarter, the highest rate since the fourth quarter of 2008. The main driver behind the surge in population growth was a jump in net-international migrants to 8,313, up from only 3,708 in Q1. The province also saw strong levels of interprovincial migration with 4,720 Canadians moving here. Natural increase (births minus deaths) added another 8,190 new Albertans.

A growing population is one of the main factors driving the Alberta economy forward. During the boom years, Alberta’s population grew by as much 99,000 people per year, while even in 2008 and 2009 (which were not strong years economically) the province welcomed nearly 80,000 new residents. The rising population helps fuel growth in a wide range of industries including construction, retail and housing.

There Is Good News in Alberta – people are moving here in numbers not seen since 2006 and the reasons are pointed out below.  Low unemployment, higher wages, and relatively affordable house prices are all strong motivators to entice people to move here.

Population growth is a huge contributing factor to economic stability in Alberta.  It creates jobs and supports the housing industry.  It provides workers to replace the huge number of baby boomers getting set to retire in the next few years and since most of those moving here are young, it creates new households and natural growth through childbirth.   We welcome all those who are considering making Alberta home.

Canadians Still Looking Towards Alberta – Dan Sumner, Economist, ATB Financial

With talk of labour shortages returning to Alberta, population growth and migration are important variables for the provincial economy. And according to second quarter 2011 figures, Alberta continues to gain citizens from other Canadian provinces.

A total of 4,720 Canadians relocated to Alberta during the second quarter of 2011, largely unchanged from the 5,275 that moved here during Q1. Alberta is on pace for roughly +20,000 net-interprovincial migrants in 2011, which if achieved will be the highest annual pace for net interprovincial migration since 2006.

During Q2 Alberta continued to have the largest net migration gain from Ontario, while losing the largest number of net migrants to Saskatchewan. Alberta was by far the largest benefactor of net-interprovincial migration in Canada in Q2, with the province in second place (Saskatchewan) gaining only 1,239 net migrants.

Interprovincial migration can be a difficult variable to predict; however, with the unemployment rate lower in Alberta, wages higher, housing prices relatively affordable and the provincial economy expected to grow among the fastest in the country, it’s hard to imagine that more Canadians won’t be calling Alberta home over the near future.

While more skilled workers is essential for the continued development of Alberta’s economy, it also puts pressure on social and institutional resources. As a former premier of this province once stated, “when people move to Alberta, they don’t bring their schools and hospitals with them.”

 A stable housing market requires a stable job market and it appears Alberta is improving in that category.  Jobs bring people to Alberta which creates demand for new construction, which in turn creates more jobs.  People who are confident in continued employment are much more likely to make large buying decisions (like homes). 

Long-Term Unemployment Picture Improves – Dan Sumner – Economist, ATB Financial

Alberta’s labour market has made huge job gains so far in 2011, adding just over 55,000 jobs since January. But even more encouraging is that long-term unemployment, which remained stubbornly high after the recession, has started to come down.

The average duration of unemployment in the province was 14.6 weeks as of August, while in July it was only 12.3 weeks. This marks the first time since the spike in the average length of unemployment occurred during the downturn that the indicator has been below 15 weeks for two consecutive months.

Nationally, the duration of unemployment was 18.8 weeks as of August. The average length of unemployment also increased in Canada during the recession, but unlike Alberta there has not been much in the way of improvement this year (see graph).

Long-term unemployment is much more serious than short-term, as being unemployed for a long time can lead to a self-reinforcing cycle of unemployment. This can then lead to skills atrophy and longer-term social problems such as health issues and homelessness.

One main reason behind the drop in the average length of unemployment in Alberta is that youth employment has finally started to make some gains in 2011. Employment among individuals aged 15-19 reached a two year high in August (seasonally adjusted) while employment among individuals aged 20-24 has increased by 10,000 this year.

Also, employment in regions of the province which were slower to recover after the downturn (such as Grand Prairie) picked up recently. The fact the employment gains are trickling down to these segments of the labour market speaks to the broad improvement the Alberta economy has experienced recently.

Great News from Alberta Treasury Branches

 Jobs Train Keeps on Rolling – by Todd Hirsch, Senior Economist – Alberta Treasury Branch

 It may have been at a more modest pace than what we saw earlier this summer, but Alberta wrapped up a stellar season of job growth with more people working in August.

According to Statistics Canada’s latest employment survey, 6,600 new jobs were created in Alberta last month. That caps off the fourth consecutive month of job gains, and brings the 12- month increase to 86,000 new jobs (+4.2%).

Due to an even sharper increase in the number of people entering the labour market, Alberta’s unemployment rate moved up slightly to 5.6%. Nationally, there was a net loss of 5,500 jobs, and the unemployment rate rose to 7.3%.

Given the global economic slowdown currently gripping much of the developed world, Alberta’s job market continues to defy gravity. Of the 86,000 jobs created in the last year, virtually all of them have been full-time positions.

High oil prices have been credited with boosting Alberta’s economy this year, yet ironically, jobs in the energy and resources sector slipped the most in August (-12,200). There were also fewer positions in educational services (-4,800). These were more than offset by increases in manufacturing, and throughout the services sector.

Even if employers take a bit of a breather in the fall, Alberta remains the most active job market in Canada. That should support other important economic industries such as retail sales, and it will also probably lead to higher inter-provincial migration activity as job seekers from other parts of the country turn their attention westward.

The housing market may already be seeing some welcomed relief as increased employment and consumer confidence among Albertans will help drive new housing starts.

Residential Construction in an Upswing?

In contrast to other sectors of the provincial economy Alberta’s residential construction sector has not had a great showing in 2011. However, recent data from Statistics Canada and the Canada Mortgage and Housing Corporation (CMHC) shows that the industry may be picking up. Actual housing starts surged in August to 27,400 seasonally adjusted, annualized units—the fastest pace for starts since March of last year. But the good news doesn’t end there. Residential building permits—which provide insight into the future direction of housing starts—surged to $641.6 million in July, their highest monthly amount since February 2010! Non-residential construction permits, which have fared better since the recession than residential, also rose in July, up 7.9% from June.

Since the recession, activity in the provincial construction sector has been slow to rebound. One of the main culprits behind this is an oversupply of multi-family dwellings (mainly condominiums), which has kept overall residential construction activity subdued. Although reading too much into one or two months of data can be deceiving, the surge in both starts and permits over the summer is probably a sign that some of the strength observed in other sectors of the economy (e.g. the energy sector) is starting to have feed-through effects on other sectors like residential construction.

Our Other Economy

We analyze and discuss the energy industry endlessly for signs that all is well in central Alberta.  But, there is another, very important economic influence in central Alberta that we often overlook.  Farming has been a major part of our local economy since Alberta was settled in the late 1800’s.

When farmers do well, the income they generate trickles into the economy in numerous places and helps fund an abundance of service jobs.  World grain production has slipped in recent years while demand has increased with population growth.  Like all commodities, when supply decreases and demand increases, prices go up. 

Alberta Farmers Anticipate Strong Crop Production – ATB Financial

Farmers in Alberta expect to harvest larger amounts of wheat and barley compared to last year, as well as a record amount of canola. Statistics Canada reported on Wednesday that according to a survey of 15,200 farms conducted between July 25 – August 2, production of all three principle crops in Alberta (spring wheat, barely and canola) is expected to rise from last year. This rise in production is thanks partly to hot, dry weather that has offset production losses due to adverse weather conditions at the start of the year. Total wheat production is expected to rise 3.8%, while barley and canola production are expected to climb 6.5% and 6.0% respectively.

This year is gearing up to be a strong crop year for many farmers in Alberta as relatively positive growing conditions across most regions of the province combined with fairly robust prices may lead to healthy jump in crop receipts. The healthy harvest in Alberta is positive news not only for farmers but also the entire Alberta economy as a strong influx of cash from crop receipts will have positive trickle down effects on the broader economy. Farmers in Saskatchewan also expect crop production to rise year despite a tough start to the 2011 crop year. Farmers in Manitoba, however, expect large declines in production of all three crops as very wet weather conditions prevented many farmers from getting their crops seeded.

Is Your Glass Half Empty or Half Full?  We are bombarded daily with bad news from all over the world.  Consumer confidence is directly impacted by that media.  Consumers make lifestyle decisions based on how they feel.

There is always good news and positive events going on in our world, especially in Canada and Alberta.  We are truly blessed to live here and benefit from the rich resources we own just because we live here.  If we look for the good news and try to look at the glass as half full, our lives will be more happy and fulfilled than those that choose the other option.

Prices Down In July, by Todd Hirsch, Senior Economist, Alberta Treasury Branches

Even small bits of good economic news are welcomed these days, and that news was delivered by Statistics Canada’s report on the Consumer Price Index this morning.

Prices for typical consumers rose by 2.7% year-over-year in July, down from the 3.1% annualized advance in June, and 3.7% in May. The national CPI increased in June primarily because of higher prices for gasoline and food purchased from stores.

In Alberta, annual consumer price inflation also eased up a bit, falling to a year-over-year increase of 1.9%. Many of the factors that drove prices higher nationally were present in Alberta as well. Energy prices rose 14.1%, and gasoline jumped by 23.0%. Food prices also rose, especially fresh vegetables (+7.7%) and meat (+6.5%).

Helping keep overall inflation in Alberta in check were price decreases for women’s clothing (-9.0%), footwear (-5.2%), and purchasing and leasing of new motor vehicles (-2.7%).

The softer inflation figures nationally will certainly support the Bank of Canada’s likely decision to keep interest rates where they’re at for an extended period of time. With all of the other more troubling economic headwinds hitting the Canadian economy from the US and Europe (see Economically Speaking), the Bank of Canada must be viewing the tame inflation figures with some sigh of relief.

On the other hand, the fact that inflation appears to be ebbing in Canada could also be considered one more piece of bad economic news. It does suggest that consumer sentiment is perhaps waning a bit, prompting shoppers to hold back on purchases and forcing retailers to slash prices. For every glass that is half full, the other half is still empty!