The question remains: can Alberta’s labour market churn out jobs at the rate people are coming to the province and entering the labour force? Afterall, Alberta leads all provinces in population growth, driven by record interprovincial migration.

The provincial unemployment rate sits at 6.2%—down from December, but up from 6.0% in January 2023 and from a low of 5.5% in September. But considering the massive labour force increase—98,000 y/y— employment has mostly kept up. For now, population growth shows few signs of abating, and we could see some higher unemployment rate readings in the coming months, before edging lower again. Our current view is that both employment and labour force growth will slow this year with the unemployment rate averaging just over 6%.

Canadian employment also surprised higher, but a closer look provides a more nuanced picture. All the job gains were part-time, and the unemployment rate only fell due to a lower rate of labour force participation. Wage growth is easing, but still uncomfortably high for the Bank of Canada. A falling employment rate points to some slack, which should temper wage gains going forward.

This mixed report will keep the Bank in a cautious and patient stance. We’re still in the June rate cut camp for now, but starting to lean closer to July. Either way, no immediate cut is on the horizon.

Exporting a quarter of Canada’s goods

We’re well into 2024, but the economic data from last year are still trickling in (and I’m still saying Happy New Year). This week we received the final tally on Alberta merchandise exports: $175 billion, second highest ever and a quarter of Canada’s merchandise exports, but shy of the 2022 record of $205 billion.

To be fair, 2022 was unique. A spike in energy and agri-food prices caused export values to soar. In July that year, Alberta merchandise exports exceeded even Ontario’s—that’s never happened before.

Alberta’s largest export markets last year? U.S. (89%), China (3%), Japan (1.6%), South Korea (0.5%) and Mexico (0.5%). This is the typical top five. China returned to number two after being temporarily supplanted by Japan in 2022 when shipments of propane surged.  The top export categories: energy (75%), food (7%), chemicals (6%) and forestry products (2.5%).

In 2024, we see export volumes picking up, mainly on rising oil production as the Trans Mountain Expansion comes on line. Trade is the main driver of Alberta’s economic growth next year in our forecast.

China now second largest export to U.S.

Speaking of trade, Mexico replaced China as the top exporter to the United States in 2023. China held the number one spot for two decades, with Canada in third spot. This is a sign of shifting trade patterns amid US-Chinese trade tensions and the trend towards nearshoring.

Home building still trying to catch the population

It was a slow start, but a much stronger finish to home building in Alberta last year. Home starts hit 42,600 (annualized) in the final quarter after beginning the year at 28,000 in Q1. Likewise with residential permits—up 29.5% over the same time frame. Interest rates and construction worker shortages are pulling, but demographic forces are pushing even harder. We see housing starts averaging about 40,000 this year—not bad, but still not enough.

Renewable gains

A new report by the Canadian Renewable Energy Association (CREA) shows that installed capacity for wind, solar and battery storage rose by 2.3 GW, or 11.2%, to 21.9 GW across Canada last year. The vast majority of that growth was in Alberta, where the province added 1.7 GW. Alberta now has a total of 5.8 GW of renewable energy generation (4.4 GW wind, 1.4 GW solar).

Interesting Fact: Calgary’s Event Center and Culture and Entertainment District is expected to break ground in 2024, with planning and engineering work underway. In addition to the Event Center, the project will include a community rink, parkade, event plazas, and infrastructure and transportation improvements. The total cost with infrastructure improvements is expected to exceed $1.2 billion.

Topic of the Week: Productivity - Part 2
Productivity Levels in Alberta: A look under the industry hood

In part 1 of our productivity series, we looked at broad trends in Canada and Alberta’s labour productivity performance.

In part 2, we take a deep dive into the industry data to find out why Alberta’s productivity is higher than the national average—27% higher in 2022 for the business sector.* In particular, our goal is to find out if this gap is related to industry mix (more workers concentrated in productive industries), or general (more productive across industries).

Not surprisingly, industry mix plays an important role. To illustrate, the following figure plots Alberta’s share of national hours worked against national productivity levels by industry.

The oil and gas industry stands out. It recorded output per hour of $387 (in $2017) in 2022—more than six times the national business sector average. Workers in that industry are heavily concentrated in Alberta.

Similarly, there is greater concentration of hours worked in other high-productivity areas linked to oil and gas extraction like petroleum manufacturing, pipeline transportation and natural gas distribution.