Has Alberta's economy hit bottom?
After more than 100 years providing Calgary with western wear and surviving many recessions and depressions, a Calgary landmark is closing its doors. The current economic downturn has proven to be too tough to weather says Brian Guichon, owner of Riley & McCormick.
“Our customer base is the downtown people who wear the western lifestyle and there’s 20,000 fewer of them living and working downtown Calgary,” said Guichon. “You just look at the numbers – our sales are going down. It’ll be a few years before it comes back and can we wait that long?”
The answer, says Guichon, is no. He says uncertainty over oil prices, municipal taxes held at boom rather than bust levels and the impact new government policies, like mandated wage increases, are nipping profit in the bud.
“The city taxes are not going down. The city is not saying: ‘Oh, the economy is bad.’ There’s that city tax bill that comes in once a year and that’s not going down; it’s going up,” said Guichon. “Rents are going up, operating costs are going up year after year.”
Calgarians like John Paul Smith have felt the pinch too.
“We have increased taxes and uncertainty within the actual provincial government and that combined, we have a situation where people are unhappy and concerned about their futures,” said Smith.
The economic situation has many wondering: have we finally hit bottom?
ATB’s Chief Economist Todd Hirsch says, when it comes to oil prices, we have. However, he expects the road to recovery will be a bumpy one. While he predicts prices to stay between $40 and $50 a barrel for the rest of 2016, we have not hit the bottom on unemployment. He says the unemployment rate could hit the double digits.
“So now that we’ve seen the bottom of the oil price drop, I think it will be probably another six or eight month lag before we start to see some real improvements in the labour market in Alberta,” said Hirsch. “Basically, I think the labour market in Alberta, the petroleum industry and all those related industries , I don’t think they’re quite finished yet trying to shed costs and get their efficiencies up.”
Hirsch says that while Alberta’s economy will recover ,it may not look like the kind of recovery that many Albertans envision.
“My guess is we will return to some modest recovery in 2017 but really an emphasis on modest,” said Hirsch. “One per cent growth is a recovery but it is still going to feel pretty recessionary for a lot of Albertans with that unemployment rate remaining elevated even if it stabilizes. When does it feel more permanent like boom times? That’s hard to say but my guess is we’re looking at at least three or four years of what will feel like pretty sluggish growth before eventually enough diversity in our economy starts to really create a lot of new jobs and it starts to feel like a boom time again.”
But those three or four years can feel like eternity for small business owners like Guichon who have to struggle each day with the current economic reality.
“We just have to say, ‘are we going to wait around until the price comes back and keep pouring more money out the door?’ and at some point you make a decision that you’re not going to do it anymore.”
With files from Lea Williams-Doherty