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Albertans confront stalled economy as campaign draws to close

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Saturday, April 13, 2019 – Page B1

Not long ago, things were looking up in Alberta.

After a brutal two-year recession, it led Canada's provinces in economic growth in 2017, as it so often did before the 2014-15 oil crash.

Hiring picked up, and the unemployment rate started to drift lower. That fall, a minimum-wage hike went into effect, and today Alberta has the highest hourly minimum in the country. Momentum was back on Alberta's side.

Then the economy hit another rough patch. Oil prices collapsed in late 2018, forcing Premier Rachel Notley and her New Democrats to curtail production, beginning this year. Major pipeline projects are still in limbo. Hiring has been almost nonexistent over the past year. Total labour compensation has flatlined. And companies aren't happy, either: Surveys show increasing pessimism among business owners.

The recovery - uneven as it was - has now stalled.

The slowdown means broad swaths of the economy have yet to fully repair the damage of the recession - including large numbers of working-age Albertans who head to the polls on April 16.

The recovery will certainly be under the microscope.

The economy is the No. 1 issue for voters, according to a recent survey from pollster Janet Brown.

Next up is pipelines, followed by jobs. Given that, the timing of the slowdown could hardly be worse for the incumbent New Democratic Party government, which swept to power on an "orange wave" in 2015, but has trailed the United Conservative Party in the polls in this campaign.

"Rachel Notley is so popular that, had the economy stayed strong, I can't imagine she'd be in jeopardy at all," Ms. Brown said.

"[The election] would have been a cakewalk for her."

Midway through Ms. Notley's tenure, the recovery was well under way. Alberta's inflation-adjusted GDP increased by 4.4 per cent in 2017, propelled by widespread strength. Manufacturing and retail sales, home starts, oil production - all metrics saw sizable bumps from the year before.

Moreover, after shedding more than 100,000 jobs in the recession, companies were hiring again.

Women led the labour charge.

During the recession, women eked out a net gain in employment. Granted, the gains were not universal: Those between the ages of 15 and 24 have suffered losses from which they've yet to recover. But those between the ages of 25 and 54, a key demographic, have fared well. Today, 77.2 per cent of that cohort is employed, well above crisis-era lows.

Women's job gains have been fairly broad-based, but include thousands of new positions in health care. They aren't solely publicly funded jobs, either: A slim majority of new health-care positions were created by the private sector and the self-employed.

But for some, the recovery has been tepid, or even nonexistent.

A notable example is men aged 15 to 24. Since the start of the recession in October, 2014, that cohort has lost roughly 35,000 positions.

Over the same time frame, its employment rate has declined to 56.7 per cent from slightly more than 67 per cent. Those without a highschool education have been hit particularly hard.

"The story there is fairly straightforward," said Trevor Tombe, an economist at the University of Calgary. "High-paying labour jobs were plentiful prior to the recession, but with lower construction and drilling activity, the support activities really fell off in oil and gas. It makes it hard to adjust and shift into other activities, if you have lower levels of skill, or no high-school degree. It's a really unfortunate part of the recession story."

It would be one thing if young men were all heading back to school - only they're not. Based on his analysis, Mr. Tombe says about half of those who lost their jobs have enrolled in education or training programs. The rest are looking for work or have stopped trying.

Older men aren't prospering like they used to, either. Those aged 25 to 54 and 55-plus have recovered their job losses. But their respective employment rates - the percentage of each group actually working - are lower now than when the recession started.

If men were employed at the same rates today as then, an additional 80,000 men would be working.

The UCP looks to have particularly strong support from men.

Among decided and leaning voters, 58 per cent of men support the party, compared with 47 per cent of women, a recent poll from Ms. Brown suggests.

Given the job losses, hardship is not tough to find. As of January, there were nearly 60,000 incomesupport caseloads under a provincial program that provides financial assistance, or close to double the amount of five years ago. The surge has been driven largely by those who are single and without children, and available for work.

The pain is being felt in all corners of Alberta. While Calgary and Edmonton have seen employment gains of 6.5 per cent and 7 per cent, respectively, since the start of the recession, in the rest of the province employment has dropped by 7.4 per cent, or 54,000 positions. That means fewer jobs in such economic regions as Camrose-Drumheller, LethbridgeMedicine Hat and Wood BuffaloCold Lake, the spiritual heart of oil and gas.

Jason Kenney, leader of the UCP, has particularly strong support outside of Calgary and Edmonton, Ms. Brown has found.

"You wouldn't know that there's an election going on here," said Ms. Brown from Innisfail, Alta., south of Red Deer. Meaning, the area should be a shoo-in for the UCP.

For those still waiting on a recovery, the wait has been extended. On some level, economic troubles kicked into high gear last fall.

The price of Alberta crude was in free-fall, with benchmark Western Canadian Select hitting a record low of less than US$14 a barrel. The reasons for the plummet were varied, but chief among them was Canada's continuing difficulty in moving product, leading to a growing glut of crude.

Ms. Notley intervened with a plan to spend billions on rail cars to help ship oil, along with a production cut on major producers.

Alberta heavy crude prices shot up in response to her measures - today, WCS trades at around US$55 a barrel - although the sector's outlook is still murky, given the uncertain outcomes of key pipeline projects.

The continuing malaise is evident in spending. The province's capital expenditures are expected to total just less than $60-billion this year, according to Statistics Canada - a figure that's been stagnant for four years, and well below precrash highs. Notably, the oil and gas sector isn't spending like it used to. (Alberta's naturalgas sector is likewise grappling with lower prices.)

"That's one area that's been lacklustre since the recession," said Omar Abdelrahman, an economist at TD Economics, of capital expenditures in oil and gas.

"Why hasn't [spending] rebounded? There's some uncertainty in the global oil-price path, and also the domestic one. ... That uncertainty means you can't expect capital expenditures to grow like they used to back in 2014."

The combination of lower oil output and weak spending is part of why Alberta's 2019 outlook is mediocre. GDP figures for 2018 have yet to be released, although the Alberta government publishes a monthly economic activity index that provides a timely reading of conditions. In December, the index - which accounts for everything from employment and wages, to oil production and truck sales - notched its first year-overyear decline since late 2016, setting an ominous tone for the coming year.

Indeed, private-sector economists expect growth to slow considerably. In its most recent forecast, TD Economics expects Alberta's real GDP to expand by 0.5 per cent in 2019, down from an estimated 2.1 per cent in 2018. Alberta is tied for last with New Brunswick in estimated 2019 provincial growth.

Of course, in many tangible ways, Alberta tops the provincial rankings: median household income, employment rate and per capita GDP, to name a few. Its population is relatively young and affluent. Alberta has much for others to envy. But less than three years removed from the worst recession in decades, the latest slowdown has many on edge.

So, is there much the NDP could have done to stop it?

"It's hard to point to any particular policy change that has led to that drop in the pace of recovery," Mr.Tombe said. "I think people really overestimate the extent to which governments can influence an economy as large as Alberta's, one way or the other."

As such, the NDP could wind up victims of circumstance.

"It's hard for any incumbent to deal with a tough economic situation," Ms. Brown said.

Associated Graphic

Alberta NDP Leader Rachel Notley, centre, was forced to curtail production earlier this year after the collapse of oil prices in late 2018.



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