A whole list of economic indicators have come together to create a bullish outlook on Metro Edmonton’s economy.
Improved job numbers, leading to more housing starts, and open wallets at city malls and car dealerships have prompted the City of Edmonton economist to revamp his prediction for growth in 2018.
“I haven’t changed the numbers yet, but I will be in January,” said John Rose in a year-end interview with 630 CHED.
He thought for sure the unemployment rate would get stuck just above eight per cent. It didn’t, and the labour force survey from Statistics Canada is expected to settle in around 7.5 per cent.
“The unemployment rate locally has come down much more quickly than I anticipated,” Rose said. “That’s going to move the housing market and the consumer side of the market along with it, so I’m thinking we’re going to looking more like rather than a low two per cent, to two-and-a-half. It’s going to be two-point-eight per cent, something like that. Maybe closer to three.”
The one buzz kill that Rose and others worry about is the ever-growing price difference in the oil that we produce here, compared to elsewhere.
Angus Watt at National Bank Financial said inventories continue to grow, without the capacity to expanded production.
“That will mean we’ll need more rail capacity,” he said.
Watt said a recent outage with Keystone in mid-December added to the problem. Rose agrees, adding his forecast will change if things aren’t improved in six months.
“We had some pipeline outages and pipeline repairs. That’s constrained shipments of oil and if that situation doesn’t resolve itself we’re going to have a problem because a gap has opened up. We’re not seeing the benefit of higher oil prices.”
The West Texas Intermediate (WTI) February contract was $59.91 at the close of trading on Thursday. On Western Canadian Select, producers are getting $27 less than that.
“We’re getting back to very, very steep discounts,” Rose said. “If you remember the bitumen bubble days back in 2013, the discount is getting back up to that kind of scale where our oil is selling at a fraction of the North American benchmark price.”
Still, Rose has optimism because we’re seeing the results of pent-up demand for cars, appliances and electronics to fill the new homes that are being built.
What unleashed all of that was signalled in mid-2017 when developers and potential home buyers watched what the Bank of Canada was saying about interest rates, according to Todd Hirsch of ATB Financial. That led to an increase in housing starts.
Hirsch said even when 91 per cent of those who would be potentially in the market were still working, and times were relatively good compared to those looking for work, people lacked confidence. Now they’re ready to buy.
“They felt like it’s just not the right time. The housing market might still suffer some drop in price. But by early 2017 enough of them thought ‘Ooh, interest rates could start to rise. If we’re going to do this, let’s do it now,’ and that’s why we saw that lift in housing starts.”
Rose said momentum can carry itself on the employment front, once confidence returns.
“Employment numbers typically lag a little bit behind what’s going on in the economy as a whole,” he said.
“Employers tend not to hire people right away even though they might see business improving. They hold back. But once they become convinced that the improvement is real, they start to hire and that process will continue, barring a very negative shock. Because a lot of growth and improvement has already taken place.”
You can see it in population numbers. Alberta added 19,905 residents this past quarter, 37.8 per cent more than during the same quarter last year, according to figures released by the province Thursday.
As of Oct. 1, 2017, Alberta’s population was 4,306,039. Many are itching to spend again.