EDMONTON — The recession Alberta experienced in 2015 will continue through 2016, with a gradual recovery closer to 2017, according to a report released by ATB Financial.
Some highlights from ATB’s Q1 Economic Update:
- Alberta’s economy contracted by about one per cent last year; a smaller contraction is likely in 2016, with modest growth possible by year’s end.
- Oil prices have fallen below forecasted levels and are not expected to recover until late 2016.
- The petroleum sector and related industries will continue to shed labour, pushing unemployment above seven per cent.
- Weak consumer demand will weigh on residential housing and retail activity, but should stabilize by mid-year.
- Net interprovincial migration is down and the province could see a few quarters of net out-migration in 2016.
Canadian dollar predictions
On Thursday the Canadian dollar continued to trade below 70 cents US for a second day. Todd Hirsch, chief economist at the provincially owned financial institution, expects it will get worse before it gets better.
“I actually think that we’re going to see a little bit more softness on that loonie before it bottoms out and perhaps gradually strengthens a bit, but I don’t think we’ve reached the bottom quite yet.”
Price of oil: how low will it go?
Hirsch said the same for oil prices. “The momentum seems still to be downwards.”
The price of West Texas Intermediate crude oil has been hovering around US$30 to US$33 in recent days, but some financial experts have predicted it could fall as low as $10.
READ MORE: A 60-cent loonie and $10 oil? Sure, why not?
The ATB report said a glut of oil across the world, economic instability in China and tensions in the Middle East have pushed the price of oil to 12-year lows — and it’s dragging the Canadian dollar down with it.
What does it mean for jobs?
ATB predicts Alberta will continue to see layoffs and a rising unemployment rate. Hirsch believes the unemployment rate could go as high as eight per cent by mid-year, which would put Alberta well above the national average of 7.1 per cent.
WATCH: Todd Hirsch, chief economist at ATB Financial, joined the Morning News to talk about what the the low dollar and plunging price of oil means for the average Albertan.
Although the majority of layoffs will be in the petroleum sector, Hirsch warned as people lose their jobs — or are fearful they’re going to lost their job — many will pull back on discretionary spending, which will affect a number of other sectors, including retail, the residential housing market, business and personal services.
Not all doom and gloom
The strain in the oil patch is affecting related industries such as manufacturing and construction. On the upside though, agriculture, forestry and tourism — the province’s other major industries — are doing well. The weak dollar has made commodity exports more attractive and is encouraging more U.S. tourism, the report said.
With files from Erin Chalmers, Global News