I recently attended a presentation given by John Rose, Chief Economist for the City of Edmonton, where he offered an analysis of what the future -- short and medium term -- held for Alberta's capital city. While the province's struggles in the wake of an excruciatingly low-priced barrel of oil is well documented, he offered a cautious but mildly optimistic outlook for the city itself. The following are the salient points as I saw it:
Rose predicted modest growth for Edmonton in 2016, likely somewhere around 1%, which is a slowdown from past years when growth hovered closer to 3% and higher.
Construction, Public Administration, and growth in the Retail sector in Edmonton have offset losses connected to stagnation in the resource sector and he felt Edmonton will be much quicker than the rest of the province to return to more robust growth in late 2016 or early 2017.
Growth in Edmonton will be dependent on government investment. Should resource revenues and oil prices continue to remain unusually low and government decides to drastically reign in spending as a result, all bets are off and further recessionary pressures would be forthcoming.
Unemployment in the province will increase by as much as 3.5 to 4.0% in the North (Wood Buffalo) and South (Lethbridge/Medicine Hat) and Fort McMurray, Red Deer and Calgary are seeing a surge in job losses. Edmonton is likely to see this key indicator grow as well, but only by 1.0%.
Low oil prices will continue into 2017 when a potential slowdown in US production helps firm up the cost of a barrel. However, Mr. Rose was quick to point out that he doesn't see the price of oil returning to the $100 mark and that the new normal would be between $50 and $80.
While a slowdown is not typically ideal for any economy, Mr. Rose did point out that continued low interest rates and modest inflation pressures would contain cost escalation for capital projects and gives the city a chance to address infrastructure and services deficits and that now is perhaps as good as any time for investment in our future.
While I'm unqualified to make these types of predictions, I can say that what I am seeing in the Edmonton market and from conversation with our clients, these observations are accurate for now. A downturn in some sectors has been offset by activity in others and Edmonton remains, at least for now, a viable and prosperous city with excellent opportunities for professional contractors.