Gerald Tostowaryk

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Well hopefully my last blog regarding Alberta's economic situation was as much fun reading as it was writing. I can't think of anything more fun to do than reading economic statistics, well except maybe watching molasses pour. Since we all acknowledge the exciting nature of economics why not a second helping? Here we go, and once again I am borrowing directly from the daily economic updates of Todd Hirsch of Alberta Treasury Branch. Todd is a sought-after speaker as he is very knowledgeable and has a great sense of humour. He recently changed the name of his daily post to "The Owl" in case you want to google it. I have no idea why it is now called the owl but I am sure there is some cryptic and incredibly astute reason. So let's delve into it, and again most of the additional comments and interpretations are mine (and hopefully right!)

 

Retail Wages

 

Retail wages have always been low as it is a relatively unskilled sector and many also earn tips. Interestingly retail wages have grown across Canada at a rate somewhat less than inflation since around 2000. Alberta's retail wages have fared better but only recently have caught up to the rate of inflation. Even though Alberta's retail workers have fared better than other Canadian retail workers, I suspect after we factor in Alberta's cost of living compared to the rest of Canada, they are probably not doing any better than other Canadians. So be kind when tipping! And speaking of unappreciated sectors...

 

 

Arts and Culture Employment

 

Arts and culture employment in Alberta has been steady at around 45000 for the last few years. While these are generally part-time and lower paying jobs, they provide some unappreciated benefits to our society. The part-time jobs provide work for young folks entering the work force and mature folks looking for a more relaxed part-time job. Just as important, what fun would life be without Heritage Days, our many festivals, sports teams, and all our cultural and recreation activities? So did I mention be kind when tipping?

 

Exports Lagging


Exports have always been a big part of Alberta's economy and energy exports a big part of that big part. And the value of those exports have been lagging a bit lately, but not to worry just yet. There are various factors at play for any economic indicator and the current lag is attributable to two factors which change regularly. Many have heard the lament about how Alberta's "Western Canadian Select" oil prices are currenlty significantly lower than "West Texas Intermediate" prices due to pipeline problems, politics, etc. Well the gap has narrowed recently so that will help our lagging exports. Additionally many refineries are down for seasonal maintenance so when they come back online, production will increase and exports should rise again...until the next inevitable blip.


Building Permits Issued


One factor the public so often overlooks when trying to figure out what is going on, yet is such an important indicator is the value of building permits issued by a municipality. It kind of reminds me of two economic indicators "public confidence" and "public spending". Public confidence is how confident the public is about their economy, and public spending is the public putting their money where their mouth is. Building permits issues is the same thing, somebody has decided to spend some money.
In Alberta the value of residential and non-residential permits issued have been rising steadily over the last year and sat at $1.4 Billion in June, up 15.9% over the year.


Job Market


Canadian economists received a small surprise last week (not uncommon in economics) when the job market came in weaker than expected. They predicted Canada's employment would rise by 6000 jobs and they found it dropped by 39,000. Surprise.

Alberta however, is proving a little stronger. Along with Saskatchewan our job market grew, theirs by 3.9% and ours by 3%. We gained 16,000 jobs in July for a total of 2.217 million workers in the province.

An additional bonus is that most of our new jobs have been in non-traditional sectors - professional, scientific and technical services, retail and wholesale trade, and information, culture and recreation - which increases economic diversity, and these positions have been good quality ones with nearly 89% being full-time.


Shortage of Workers


With such a robust job market, Alberta has been by far the largest employer of foreign workers out of all provinces in Canada. We employ some 84,000 foreign workers with Ontario coming in a distant second with just under 50,000.

Needless to say the largest employment of foreign workers is in the food and accommodation sector with nearly 32,000 of the 84,000. This also raises valid questions about the long-term viability of keeping so many foreign workers in the province.



So there you have it, again mostly good news.But economics is never that simple.

With the apparent advent of the "global village" the economies of the various countries are becoming more and more intertwined. As the news media so enjoys dwelling on the negative, we all know too well how fragile the economies of Europe and the US are, with their unfathomable deficits and debts. On the good side, we appear to be in the trough and the US is showing signs of slowly coming around and Europe beginning to address their problems also.

I remember a couple years back being at a Realtors Association of Edmonton economic forecast breakfast and one of the speakers put it so eloquently "enjoy the party but dance close to the door". While things are a little less volatile than they were back then I think the same advice still applies. Get out there, do some business and make some profits, but keep your fallback position a safe one. Overextending on credit is never a safe strategy but it may even more so not be an advisable course of action in this environment. Just one man's opinion!

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I remember some years back when I was out hunting with a friend and I heard that lovely sound of a couple of shots coming from his direction. I headed over to find him and when we finally met up, he had the proverbial good news-bad news scenario for me; "I got a moose, but we only have a couple hours of light left" Well off to work we went dressing out this big animal and getting it out of the woods.

In today's world, economic updates seem to always be of interest, and they all seem to be the same - good news mixed with bad; hope mixed with despair. Alberta on the other hand, seems to be mostly all (but not all!) good news these days.

So what is the scoop on Alberta's economy these days? Let me give you a taste of several tidbits of what is going on. The following updates are all recent posts from Todd Hirsch of Alberta Treasury Branch. Todd's daily updates are quite popular and you can follow him on Twitter @ABeconomist. Some of the ad-lib comments are mine.

 

Employment

In the last two years full-time employment is up over 11% while part-time employment is down around 3%. The drop in part-time employment is probably a good thing indicating part-time jobs turning into full-time.

 

Population Growth

Alberta's population grew by a nice 2.5% from 2011 to 2012. Of course it's all those people moving in to the province for work, right? Wrong. Well, two-thirds of them were from in-migration (if that is even a word) but almost 8 out of every 25 were from an excess of births over deaths, natural population growth

 

Retail Sales Increases, but...

Alberta retail sales have been climbing steadily over the last few years. From May of 2011 to May of 2013 monthly retail sales have increased from $5.2B (seasonally adjusted) to about $6.1B. Interestingly, comvenience store sales have been decreasing, down 23% in the last two years. Why? The answer is one of those deceptively simple ones...grocery stores are open longer hours these days, and since they do have better prices, where do we go? To the grocery store of course. Interesting. It may be worth watching to see how convenience stores respond.

 

Construction Spending

Non-residential construction spending has had some ups and downs but overall is keeping a pretty good pace. Since bottoming in 2010, commercial construction spending is up around $1.8B. Industrial spending is crawling ahead also, reaching approximately $400M by April of this year. Institutional/government spending dropped dramatically from a high of approximately $1B in Q2 of 2010 to a current level of also around $400M.

 

Employment Insurance

With our strong economy, the number of EI claimants had dropped dramatically from about 70,000 in May of 2009 to a current level of around 28,000. Not bad. As always, youth are hit the hardest with an unemployment rate of approximately 8%, almost double the national average.

 

Prices and Earnings

So, are we making more in Alberta? Are we spending more? Yes and yes. The good news is that our earnings have risen faster than the rate of inflation since 2006 and we have more disposable income. Before 2006 earnings increases were pretty much neck and neck with inflation. Mind you, prices have been rising at an annual rate of 2.3% in Alberta this year, compared to 1.2% for the rest of Canada. I don't know about you but those inflation rates these days just don't seem right, prices seem to be rising fairly quickly to me. Who knows?

 

So there you have it, mostly good news mixed in with a few tidbits of bad news. I will give you another smattering of Todd's updates in another blog post soon, but feel free to check him out on Twitter @ABeconomist and get your own good news/bad news scenarios directly. Oh yes, the moose. Well the bad news is it started raining shortly after dark, and we were stumbling our way around through the bush until 1:30 am. It's amazing how 40 yards can be an eternity in pitch black. The good news is we finally got him out of the bush safe and sound. Bed never felt so good.

 

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