ATB Financial says it expects the worst of the energy downturn to be over and Alberta to emerge from a two-year recession caused by the collapse of oil prices.
In its economic outlook released Wednesday, the provincially owned bank says it expects Alberta’s economy to grow 2.1 per cent next year after a forecasted contraction of 2.6 per cent this year and a shrinking of four per cent last year.
ATB chief economist Todd Hirsch says with oil prices expected to hover around US$50 to US$55 a barrel next year, there will be increased stability in the energy industry — but not growth.
“We are pretty confident that we’ve seen the worst of this downturn, that we’re not likely to test that US$27 West Texas Intermediate price again, and that we’ve seen prices rebound modestly and stabilize,” he said.
“We are expecting the recession will end in 2017, however the unemployment is going to remain elevated.”
Hirsch said the stability should mean a tapering of further job losses, but that the rehiring of the tens of thousands of energy workers who have lost their jobs in the downturn isn’t expected to start for at least another year or more.
“Even though we are forecasting a return to modest GDP growth in 2017, we do emphasize that it will be modest, and the gains in the job market are likely to be very slow in coming,” he said.
Industries like manufacturing and business services continue to struggle to cut costs and increase efficiency, much like the energy sector, said Hirsch, limiting job growth potential.
There is more room for job and economic growth in agriculture, forestry, and tourism, but Hirsch noted the second through fourth biggest industries in Alberta are much smaller than energy.
“Even combined, they’re dwarfed by the petroleum sector, they don’t even come close,” he said.
“We will also see some of the results of the rebuilding effort in Fort McMurray next year.”
ATB expects the overall unemployment rate to climb slightly to 8.1 per cent next year from eight per cent this year before edging down to 7.7 per cent in 2018.
“We think that the jobs situation in Alberta is probably still going to get a little bit worse before it gets better,” Hirsch said.
Alberta’s labour market continues to grow, with 13,300 new jobs added in September for one of the highest monthly gains in years, but Hirsch said the numbers show a deterioration in the quality of job growth with 9,300 of those positions part-time.
“The quality of the job market is deteriorating,” said Hirsch. “However, I would note it’s putting Alberta much more on par with other provinces.”
With a file from Global News