Alberta s Economic Prospects and Regional Impacts Presentation to PREDA REDA January 28, 2011
Is World Economy s Recovery Sustainable? Uneven global recovery, with widespread financial and fiscal turbulence Weak recovery in Europe: ongoing financial risks due to Greek and Irish crises; German economy doing very well Modest recovery in North America; new round of quantitative easing in US improves US outlook Sharp recovery in emerging markets, led by China, India and Brazil (but some risk for China) Very high government debt: Japan, Ireland, Italy, US, UK Removal of fiscal and monetary stimulus needs to be done carefully Very weak labour and housing markets in US
Canada in Better Shape than US? Canada s recovery is built on strength of domestic economy, but stronger revival in US employment is key to maintaining momentum in 2011 Economic growth was weaker than expected in 2 nd half Budding core inflation, higher energy prices and rising sales taxes have prompted BoC to start lifting rates High commodity prices will keep Loonie strong Real GDP growth of 2.9% in 10; 2.5% in 11 as domestic economy and government spending cools
Alberta on the Rebound Alberta is now out of recession: high energy prices; global recovery; surging oil investment Alberta s GDP fell by 4.5% in 2009: falling investment and exports; large 20%+ declines for manufacturing, agriculture, construction Strong employment gains in 2 nd half 10 Consensus forecast: Alberta GDP rose 3.2% in 10 Until 2008 the economy was growing at rates well beyond its capacity Current slowdown is easing pressures on housing and infrastructure and reduces inflation
Current Alberta Indicators Building permits up 3.5% in 10 Housing starts up 36% in 10 MLS sales down 10% Retail sales up 5.1%; car sales up 9.7% Oil production up 6.1%; gas production down 5.7% Consumer bankruptcies down 20% Manufacturing sales up 10% Farm cash receipts down 7.1% Exports up 12% (high oil prices)
Real GDP Growth Alberta vs. World, Canada and U.S. 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0-4.0-5.0-6.0 Percent 5.2 2.5 1.9 1.7 2.7 0.5 0.0 1.4 World US 4.8 Can 4.0 4.1 3.2 3.3 AB 2.8 2.9 3.0 3.1 2.8 2.5-0.8-2.6-2.5-4.5 2007 2008 2009 2010(f) 2011(f) 2012(f) 3.6 Sources: Statistics Canada, Bureau of Economic Analysis (historical); average of recent forecasts by Conference Board of Canada, Global Insight and major Canadian banks; EIU
Unemployment Rate Alberta Economic Regions (December 2010) Wood Buffalo Cold Lake 4.9% Athabasca-Grande Prairie 5.7% Edmonton Region 5.4% Red Deer Region 5.1% Banff-Jasper Rocky Mtn. House 6.0% Calgary Region 6.0% Camrose-Drumheller 5.1% Lethbridge-Medicine Hat 4.3% Provincial Rate 5.6% Note: regional rates are 3-month averages Source: Statistics Canada, Labour Force Survey
Industry Sector Prospects Rising value of the Canadian dollar may limit export growth to the US, but US outlook has improved Oil prices are relatively higher than natural gas prices; long-run oil prices driven by growth in China and India US shale gas means gas prices will stay low, but domestic demand for gas is on the rise (oilsands/power) High oil prices should stimulate investment in 2011 Agriculture prices have rebounded: growing demand in Asia and biofuels; COOL impacting livestock/meat Forestry prices are recovering, except for OSB prices
Data and Analysis for Peace Country (New REIR reports on http://www.albertacanada.com/aboutalberta/regional-economic-indicators.html)
Differences in Geography PREDA vs Peace Country Part of Peace Country Region; non-member PREDA: Donnelly Girouxville Hines Creek Manning Wembley
Peace Country Indicators
Population Estimates 134,000 Peace Country Alberta 3,700,000 3,650,000 132,000 3,600,000 130,000 3,550,000 128,000 3,500,000 126,000 3,450,000 124,000 2006 2007 2008 2009 3,400,000 Source: Statistics Canada
Source: Statistics Canada Population Estimates
Age Pyramid 0-24 year-olds have larger share in PC than in AB 45+ have smaller share 25-44 identical shares Source: Statistics Canada Census 2006
Aboriginal Population
% of Population between 25 and 64 Educational Attainment 30.0% Highest Educational Attainment - Peace Country Peace Country Region Alberta Average 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% No High School Diploma High School Diploma Trades Certificate Post-Secondary Diploma Bachelors Degree Above Bachelors Highest Educational Attainment
Regional Labour Force In 2009, regional labour force fell to about 81,000 Employment declined by almost 4,000 jobs - to less than 75,000 (from 78,200 in 08) Unemployment rate: 7.8% in 09 - up from 3.8% in 08 Participation Rate: 77.9% (Labour Force/Population 15+) Largest sectors in 09: Oil & Gas plus Forestry (10,000); Retail (10,000); Construction/Healthcare (7,000) Sectors with >4,000: Transportation; Education; Accommodation 1,610 workers received EI in 09 (up from 820 in 08) EI down 44% Nov 09 to Nov 10; AB down 32%
Labour Force Survey Population (15+) and Employment in Peace Country 110 Thousands Population 15+ Employment 100 90 80 70 60 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Statistics Canada's Labour Force Survey
Labour Force Survey 79% 78% 77% 76% 75% 74% 73% 72% Participation Rates Alberta Peace Country 75% 74% 73% 72% 71% 70% 69% Employment Rates Alberta Peace Country 71% 68% 2009 Census 2006 2009 Census 2006
Regional Agriculture Number of farm operators: 5,120; 10.4% of AB Farm cash receipts: $635 million; 6.4% of AB Land in crops: 3.2 million acres; 13.5% of AB Alfalfa: 555,000 acres; 14.1% of AB Hay/fodder: 400,000 acres; 19.4% of AB Canola: 840,000 acres; 20.7% of AB Wheat: 660,000 acres; 10.2% of AB Value of livestock: $289 million; 5.8% of AB Cattle and calves: 339,000; 5.3% of AB
Beef Industry Consolidating Herd reduction: US 3.8% down between 06 and 10 Canada down 17% between 05 and 10; AB down 18% Source: Statistics Canada
Shrinking herd - Losses ongoing Pork in Precarious State Smaller industry likely - Exchange rate key Source: Statistics Canada
Regional Agriculture 300,000 250,000 200,000 150,000 100,000 50,000 0 Inventories of Cattle and Hogs at Mid-Year in CD 19 Cattle Hogs Source: Statistics Canada and AARD
Regional Forestry Central region accounts for 26% of AB log volumes consumed by below industries Log volumes for OSB: 1 million m 3 in 09, down 55% from 05 Log volumes for lumber: 2.4 million m 3, up 2% from 05 Log volumes for pulp/paper: 2 million m 3, down 5% from 05 Peace Country accounts for 44% of Alberta sawmill production
State of Alberta Forestry Sector Alberta not immune to business pressures facing forest product companies throughout North America Direct and Indirect jobs have declined from peak of 49,600 in 2004 to about 31,600 in 2009 2004 2009: value of production forest products (pulp & paper, sawmills, OSB) declined by $1.6 billion (or by 1/3) In 2010, value of shipments and exports up nearly 20% It is expected that it will take some time for export markets to fully recover, particularly in U.S.
U.S. Canada US and Canadian Housing Starts Housing Starts in the U.S. and Canada (seasonally adjusted at annual rates) 2500 Thousands Thousands 300 2000 250 1500 200 150 1000 500 U.S. Canada 100 50 0 0 Sources: CMHC and U.S. Department of Housing and Urban Development
Source: Alberta Sustainable Resource Development Forest Product Prices
Regional Energy Gas production: 34.8 billion m 3 in 09, down 4% from 04 Oil production: 6.9 million m 3 in 09, up 9% from 04 860 wells spudded in 09; down 56% from 04
Gas Prices to Remain Weak
US Shale Gas Cause of Weak Gas Prices Source: U.S. Energy Information Administration
Number of Businesses by Employee Size Source: Statistics Canada s Business Register
Number of Businesses by Industry PSTS: Professional, Scientific and Technical Services FIRE: Finance, Insurance and Real Estate Source: Statistics Canada s Business Register
Accommodation Sector Region had 41 accommodation properties with 3,400 rooms Average occupancy rate in the region was 52.0% Average room rate was $112.28
Personal Income Source: Alberta Finance & Enterprise Average individual income: $34,500 in 07; #6 of 14 regions Income grew 42% 03 07; #5 of 14
Consumer Prices Regional price levels are close to the Edmonton benchmark level Shelter costs are lower than in Edmonton
Alberta Wage and Salary Survey 2009 Peace Country Region Alberta Wages by Industry Average Hours Worked Average Hourly Wage Vacancy Rate Hiring Difficulties Average Hours Worked Average Hourly Wage Vacancy Rate Hiring Difficulties Total, All Industries 38.8 $22.39 5.1% 51% 37.3 $24.34 3.0% 41% Oil & Gas Extraction 46.7 $29.89 2.0% 46% 41.3 $43.53 1.0% 17% Construction 44.5 $26.52 5.0% 62% 42.3 $28.50 3.0% 61% Manufacturing 41.2 $26.51 2.5% 60% 40.1 $24.70 1.4% 54% Retail Trade 35.7 $17.41 1.8% 46% 33.7 $17.31 2.3% 41% Transportation & Warehousing 44.3 $29.35 0.8% 58% 42.2 $24.31 3.7% 51% Finance, Insurance & Real Estate 37.2 $22.78 3.1% 47% 36.3 $24.02 1.5% 33% Scientific, Technical & Professional Svcs 41.9 $26.68 2.3% 65% 39.2 $34.56 1.5% 45% Health Care & Social Services 37.1 $22.18 3.8% 56% 37.3 $26.33 4.0% 51% Accommodation & Food Services 32.3 $12.24 13.3% 76% 32.3 $11.95 6.9% 65% Source: 2009 Alberta Wage and Salary Survey
Economic Indicators: Peace Country Region Major Construction Projects, As of September 30 Industry Sector Number of Projects Investment Value ($millions) 2010 2009 2010 2009 Mining* 1 1 $4,500 $4,500 Oil Sands 1 0 $3,450 $0.0 Power 3 6 $1,570 $2,497 Institutional 9 13 $631 $239 Infrastucture 21 19 $391 $339 Other 18 0 $622 $756 Total 53 54 $11,164 $8,331 % of Provincial Total 5.6% 5.2% 4.8% 3.5% Source: Alberta Finance and Enterprise, Inventory of Major Alberta Projects * On Hold GP housing starts: 506 in 10 down from 586 in 09 Housing units: 769 in 09; down 40% from 08
Building Permits Building Permits: $483 million in 09; down 21%
Conclusions World economy has emerged from recession Outlook is for slightly weaker growth in 11 many risks US economy needs to gradually unwind stimulus Alberta expected to see return to strong growth over medium term Oil prices at high levels, but gas prices are weak Rising US shale gas production is a threat Forestry prices are improving; strong agricultural prices US housing starts will remain at depressed levels Livestock inventories continue to decline (COOL) May need to look at other foreign markets for forest and agricultural products, e.g. Asia
Appendix Census Info
Basic Indicators 2006 Census Population in region was 279,000 in 2006, up 11.0% from 2001 Employment was 154,500; up 22,800 or 17.3% Unemployment rate 4.2% Largest industries: 1) retail trade (16,735); 2) oil and gas (16,130); 3) healthcare/social assistance (15,260); 4) agriculture (14,355); 5) construction (14,130) Rapid growth ( 01 06) in oil and gas (+7,130) Agriculture continues to decline (-2,055) Median family income was $69,077 in 2005
Demographic Profile Age profile: prime working age population (20-49) 46.2% of total population (45.8% for AB) Age profile: seniors (65+) 8.5% of total population (10.7% for AB) More in-migration from other provinces (4.6% of AB), but less from other countries (1.4% of AB) 5.3% of population were immigrants (16.2% for AB) 11.6% identified as aboriginal (5.8% for AB) 51.1% of population 25-64 has postsecondary qualifications (60.5% for AB); 22.8% has no high school certificate (15.4% for AB)
Occupational Profile 7.5% of occupations in agriculture (3.4% for AB) 4.0% of occupations in forestry (1.4% for AB) 23.1% in trades, transport and equipment operators (18.2% for AB) 20.4% in sales and service (22.7% of AB) 3.9% in manufacturing (3.4% for AB); forest products 14.7% in business, finance and administration occupations (17.7% for AB) 9.8% in health, science and education (12.5% for AB)
Employment by Industry 2006 Census Accomm/ Food Serv 6% Em ploym ent Shares by Industry Alberta Health/ Educatio n 15% PSTS 8% All Other Industries 29% Wholesale/ Retail 15% Co nstructio n 9% Agriculture & Fo restry M anufacturing 7% 4% Oil and Gas 7% Accomm/ Food Serv 6% PSTS 5% Employment Shares by Industry Peace Country - Census 2006 Health/ Education 13% All Other Industries 25% Wholesale/ Retail 15% Construction 9% Manufacturing 5% Agriculture & Forestry 10% Oil and Gas 12% PSTS = professional, scientific and technical services
Employment by Industry 2001 Census Employment Shares by Industry Peace Country 2006 Census Employment Shares by Industry Peace Country Accomm/ Food Serv 6% All Other Industries 25% Agriculture & Forestry 13% Accomm/ Food Serv 6% All Other Industries 25% Agriculture & Forestry 10% Health/ Education 14% Oil and Gas 8% Health/ Education 13% Oil and Gas 12% PSTS 4% Wholesale/ Retail 15% Manufacturing 6% Construction 9% PSTS 5% Wholesale/ Retail 15% Construction 9% Manufacturing 5%