Calgary unemployment rate down from a 22-year high of 9.4% in 2016 to 8.7% last year
Economic growth is set to moderate in Calgary and Edmonton this year, with the cities expanding by 2.5 per cent and 2.2 per cent respectively, according to The Conference Board of Canada’s Metropolitan Outlook: Winter 2018.
“In line with continued gradual oil price gains and modest investment intentions in the oil sands, economic growth is forecast to ease to a more sustainable pace this year in both Calgary and Edmonton,” said Alan Arcand, Associate Director, Centre for Municipal Studies, The Conference Board of Canada. “We expect growth to remain in the mid-2 per cent range over the next five years.”
Higher oil prices fueled a big rebound in Calgary’s economy last year, as real GDP growth surged 6.9 per cent, although the city did not fully recoup the losses experienced after the oil price collapse in 2014. That task should be accomplished this year, however, as Calgary’s economy is expected to expand by a further 2.5 per cent.
Recovery in the energy sector helped output in Calgary’s primary and utilities industry expand to a record 13.5 per cent last year—the sector’s first double-digit gain. This year, output is forecast to expand by a more sustainable 2.6 per cent.
The energy sector turnaround has also breathed new life into Calgary’s domestic economy. For example, the construction sector is forecast to expand by close to 2 per cent in both 2018 and 2019. Although sky-high vacancy rates will keep the downtown office market subdued, major projects such as the $3-billion StoneGate Landing business park and government infrastructure spending should provide a boost to the industry.
Meanwhile, residential construction continues to be challenged by high inventories of unsold new homes, rising interest rates, and an expanded federal mortgage stress test. Thus, housing starts are expected to rise only modestly this year.
Retail spending bounced back strongly last year too, as local consumers regained their confidence, but more modest gains are in the cards this year. We expect retail output growth to decelerate sharply from 8.9 per cent in 2017 to 2.4 per cent in 2018. Wholesale trade will experience a similar slowdown.
Rising employment helped cut the unemployment rate from a 22-year high of 9.4 per cent in 2016 to 8.7 per cent last year. With employment forecast to rise 2.0 per cent this year, the unemployment rate should edge down further to 8.2 per cent—still high by Calgary’s standards.
Like Calgary, Edmonton’s economy benefited last year from higher oil prices and stronger investment and drilling plans in the oil patch, but real GDP growth is poised to moderate this year. Following a vigorous advance of 5.2 per cent in 2017, real GDP growth is forecast to cool to 2.2 per cent this year.
Oil prices are expected to continue their gradual rise, helping output growth reach 2.5 per cent in the primary and utilities industry this year, down sharply from a 12.2 per cent gain in 2017. Edmonton’s manufacturing sector, which is closely tied to the energy sector, also rebounded last year with 7.9 per cent output growth and is expected to experience further growth of 2.8 per cent this year.
The bounce back in energy investment also helped local construction output growth reach 6.0 per cent last year. This year, construction output is forecast to climb by a modest 1.8 per cent. While the downtown core remains busy with many major construction projects, a significant increase in office inventory has caused office vacancy rates to surge, dissuading developers from breaking ground on new projects. On the residential front, builders are expected to remain cautious and housing starts are expected to drop for the second time in three years in 2018.
Last year’s big economic turnaround failed to provide a jolt to Edmonton’s job market. After a flat reading in 2016, employment edged up by less than half a per cent in 2017. However, hiring should finally start picking up this year, with job growth forecast to reach 1.0 per cent.
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