Alberta is facing a full-blown economic crisis and it needs support, not condescension
Western Canada is currently facing uncertain times not witnessed since the Petro-Canada Centre, better known as Red Square, was built to house the then Crown Corporation in downtown Calgary in 1983. And with no resolution in sight for the five-year-long rout in oil and natural gas prices, things are going to get a lot worse before they get better.
While Encana’s decision to move its headquarters to Denver made headlines, the reality is that business are leaving the province in droves. One local realtor, Robert Graham at Arrowstar, told Global News recently that Arrowstar alone has helped 100 Western Canadian companies relocate to the Houston area, 40 of those in the past year and a half.
Others are shutting up shop completely, or closing locations in the province: Chili’s shut all but three of its Alberta locations in 2017; Red Robin has plans to pull out of Alberta by year-end; and Starbucks has announced numerous closures in both Edmonton and Calgary. That on top of the multitude of mom-and-pop businesses that are simply going bust.
In total, we calculate that business insolvencies in Alberta have skyrocketed by more than 70 per cent from their 2015 lows, as compared to a 13.5 per cent decrease on average for the country as whole over the same period. Here in Calgary the mood is outright abysmal, with 89 per cent of businesses saying the current economic situation has deteriorated since last summer, according to city’s annual citizen satisfaction survey.
Adding it all up, at the end of 2018, Alberta’s real GDP was one per cent below where it was in 2014 and six per cent lower on a per capita basis, according to ATB Financial. And it isn’t looking much better with what could be negative real GDP growth in 2019, according to the Conference Board of Canada. In fact, a recent Conference Board study showed that Edmonton and Calgary will post the weakest economic performance among 13 major Canadian cities this year.
The result has been job losses — and a lot of them — sending unemployment rates in Calgary and Edmonton north of seven per cent, well above the Canadian average of 5.5 per cent. However, this really doesn’t tell you just how dire it is for many Albertans as we calculate that personal insolvencies are up nearly 28 per cent from their 2014 lows as compared to a 15 per cent decrease in Canada over the same period.
While some economists are still citing our historically above-average “per-capita income” levels, consider this: one in four people using food banks in Alberta is employed or was recently employed — the highest level in the country.
All of this may sound like preaching to those not affected but the fact of the matter is Alberta is facing a full-on crisis, and there is a real need for support and assistance, rather than condescension.
A great place to start is with pipelines, and I mean more than just the Trans Mountain. Federal government policies are going to have to shift from being anti-resource development to ones that indicate the province is open for business, not only to attract foreign capital but also to stop the current exodus.
Adjusting equalization so that struggling provinces such as Alberta and Saskatchewan can use more of their federal tax dollars for large infrastructure projects that are currently on hold would also send a very strong message.
Regular Albertans also need to do everything they can to make sure they have the financial wherewithal to weather the storm. That means ensuring that savings and RSPs are topped up (if you’re still fortunate enough to have money to put away), diversifying your holdings and avoiding illiquid private investments. Also, make sure you have a personal financial plan, mapping out contingencies in the event of potential economic impacts.
We didn’t invent hardship but Alberta is a province built on sweat, tears and hard work. Our founders each took a small piece of land leased from the railroad, including my grandfather who came here in 1905 from Montreal, and together turned the province into what was more recently one of the economic engines of Canada.
This meant we were able to be huge financial contributors to confederation to the tune of $611 billion in transfer payments from 1967 to 2017, and lend a helping hand offering tens of thousands of jobs to those impacted by economic troubles in their own respective provinces.
Asking for bit of compassion during tough times shouldn’t be considered a slap in the face but rather something most Canadians can understand.
Martin Pelletier, CFA is a Portfolio Manager and OCIO at TriVest Wealth Counsel Ltd, a Calgary-based private client and institutional investment firm specializing in discretionary risk-managed portfolios as well as investment audit and oversight services.