The first half of 2016 is likely to be the roughest yet as the economic downturn continues in Alberta, Canada. On Jan. 14, ATB Financial released its latest quarterly Economic Outlook for the province, providing insight into what may happen in the months ahead.
Capturing five primary economic indicators, the key results from ATB's Alberta Economic Outlook are:
- Alberta's economy contracted by about 1% last year; a smaller contraction is likely in 2016, with modest growth possible by year's end.
- The petroleum sector and related industries will continue to shed labor, pushing unemployment above 7%.
- 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 net out-flow in one or more quarters in 2016.
- Oil prices have fallen below forecasted levels, and are not expected to recover until late 2016.
As Alberta's economy remains closely tied to the price of energy resources, early 2016 holds little chance of a quick rebound. Despite this, at -0.5%, real GDP is projected to shrink less in 2016 than it did in 2015.
"As we move into 2016, excess global supply from OPEC producers coupled with uncertainty in China, Europe, and the Middle East will continue to weigh on oil prices," said Todd Hirsch, ATB's chief economist. "This will lead to even greater stress on the balance sheets of the province's energy producers as they struggle to reduce costs."
The ongoing slump in oil prices likely means more layoffs in the oil patch.
"Our labor market will remain challenged, including the loss of some labor to other provinces,” Hirsch said. “But hiring in other sectors will help to offset job losses, though, in some cases, these will be lower-paying jobs."
There are some bright spots. Alberta's other major industries – agriculture, forestry, and tourism – continue to perform well. The weak Canadian dollar encourages more tourism and helps Alberta's exporters.