In this week’s The Seven…

• Counting people: Population growth to slow…but by how much?
• Cooling point: Canada’s labour market 
• Wildfire watch: Monitoring tourism impacts
• Setting the stage: Door wide open for Fed rate cut in September
• Equity stake: Historic Indigenous partnership reached  
• Interesting Fact: Inflation in Russia
• Charts of the Week: Alberta exports to the U.S. 

It felt like summertime in Canada this week, as swimmer Summer MacIntosh earned two golds at the Olympics (and, wow, by a wide margin!). As of Friday morning, Canada’s medal count sits at 9 with another gold coming from Christa Duguchi in Judo.

Canada’s GDP in May was better than expected, but the per capita trend remains weak. It will take some time to get on the economic podium.

In other highlights, a historic energy deal was struck with Indigenous communities, the U.S. Federal Reserve remained on pause (but not for much longer), and we continue to monitor the economic fallout from last week’s devastating fires in Jasper.

With the November election looming in the U.S and trade coming into sharper focus, we look at what Alberta exports to the U.S. in our Charts of the Week.

The denominator effect - how much will population growth slow?

Last week’s Bank of Canada interest rate cut stole the news.

But keen summertime readers of the Monetary Policy Report (MPR) (who isn’t?) may have noticed plenty of references to population growth and per capita measures.

Canada’s real GDP per capita has been trending lower since mid-2022 even as the economy has continued to grow overall. This matters, as per capita GDP (not GDP) is connected to living standards.

In Alberta, job vacancies are following a similar downward trend. But since late 2023, a new pattern has emerged: Alberta is now roughly on par with the national job vacancy rate after spending nearly 10 years below it (hobbled by a recession in 2015-16, 2019 market access issues and COVID). Still, rapid labour force entry has put pressure on the unemployment rate—7.1% in June (up from 5.8% a year prior).

Wildfire tracker - monitoring tourism  impacts

Last week we discussed the wildfires, highlighting potential energy production disruptions and tourism impacts.

Here’s what we’ve learned this week:

• Parks Canada reported (as of July 26) that 358 of Jasper’s 1,113 structures were destroyed (about a third).
• One preliminary estimate of the insurable losses by DBRS is “up to $700 million.” It will take more time to get a better indication.
• CN Rail has resumed operations, after a pause between Wednesday and Friday of last week, and reported on Sunday that it has returned to pre-fire levels.
• The Trans Mountain Pipeline that flows near Jasper has not been disrupted.
• Commercial traffic is opening on a limited basis on Highway 16.   

Turning to tourism, the loss in visitor flows and tourism is significant. The vast majority of the 25,000 people evacuated from the Jasper area were visitors (the town has a population of about 5,000).

We don’t know how soon tourism can resume. However, past visitor spending data provides some clues on the potential impact.

Spending in the Canadian Rockies region (in Alberta) by foreign residents was $553 million in the third quarter (July to Sept) of 2019.  That’s just over half of the $1.1 billion total in foreign spending for the entire year.* 

In addition, spending by Canadians was nearly $1.3 billion in the Canadian Rockies region in 2019.

The most reliable statistics are for the Rockies region, and apportioning to Jasper is more challenging. One study estimated about a fifth of visitor spending in the Rockies region takes place in Jasper.

Therefore, a rough estimate is that visitor spending would have been (in the absence of the fires) well in excess of $200 million for the Jasper area in the third quarter. That’s now at risk. There will also be lingering impacts well into 2025, as the town rebuilds.

*Statistics Canada publishes Canadian Rockies spending data up to 2022, but those are still weighed down by pandemic-related disruptions. 2019 is a better representation, though that year will be on the low end as total foreign visitor spending more than surpassed 2019 levels in 2023.

Setting the stage  - Fed on hold, but signals rate cut

In some ways, Wednesday’s interest rate ‘hold’ decision by the U.S. Federal Reserve (the Fed) was a non-event. Everyone was expecting it.

Instead, the question was: would Fed Chair Jerome Powel give hints on what’s next? And voilà: “A reduction in our policy rate could be on the table as soon as the next meeting in September.” That’s about as much forward guidance as one could expect. Powell says the Committee is getting more confident that inflation is coming down—at least enough to start talking about lowering its policy rate.

For more insight, see this QuickTake from the Rates Desk at ATB Capital Markets.

Weaker U.S. jobs report makes September cut a virtual lock

If there were any doubts about a September rate cut in the U.S., they were mostly erased this morning. The jobs report disappointed expectations, with payrolls advancing only 114,000 in July and the unemployment rate up 0.2 points to 4.3%. That was enough to push Claudia Sahm’s recession indicator above the threshold. That doesn’t mean a recession is inevitable (Sahm has said that herself), but it’s a warning sign.

The U.S. economy has been resilient (annualized second quarter growth was 2.8%), but there are indications of slowing—rising unemployment being the latest.

Historic energy deal with Indigenous Communities

Big news this week as TC Energy announced a historic equity ownership agreement with Indigenous communities.

With a purchase price of $1 billion, an Indigenous-owned partnership will become minority owners of TC Energy’s NGTL System and Foothills Pipeline assets.

The arrangement is backed by the Alberta Indigenous Opportunities Corporation (AIOC) and was negotiated by a committee representing Indigenous communities across Alberta, B.C. and Saskatchewan.

Up to 72 First Nations and Métis communities will benefit, providing important economic and revenue generating opportunities.

Interesting Fact… Russian inflation surges

As more central banks look to pivot to lower interest rates amid easing inflation pressures, Russia is going the other way. Driven by wartime spending and a shrinking labour force, the economy is overheating and price pressures are building. Inflation has spiked above 9% and last week Russia’s central bank hiked its policy rate from 16% to 18%.

Charts of the Week: Alberta’s exports to the U.S.

The U.S. presidential race is in full swing, with President Joe Biden withdrawing and endorsing Vice President Kamala Harris.

Trade is shifting into greater focus given the protectionist sentiments of the two main candidates, most notably talk of broad-based tariffs from former President Trump. We don’t know what measures (if any) will be taken, but one thing is certain: the Canada-United States-Mexico Agreement (CUSMA) is up for review in 2026.

It’s hard to overstate the importance of U.S. trade to Canada’s and Alberta’s economy. Alberta’s exports of goods to the U.S. totaled $156 billion in 2023. The pie chart shows what Alberta exports to the U.S.

What share of Alberta’s exports go to the U.S.? About 89% of total goods exports in 2023 (nationally, the share is 78%).

But there is a great deal of variation across products. Looking at the 11 main categories of the North American Product Classification System, the concentration was highest for energy products (97% of all exports flow to the U.S.) and lowest for farm and intermediate food products (37%) in 2023.

Where inside the U.S. does Alberta send its goods? Illinois, Washington, and Texas are the three largest markets at over $10 billion each in 2023. In fact, Alberta sends more to these states than it does to any other country (including second ranked China). For more, see our feature Alberta’s exports to the U.S. - where do they go?

Answer to the previous trivia question: The oldest athlete on Canada’s 2024 Summer Olympics team is dressage rider Jill Irving at 61.

Today’s trivia question: How many of Team Canada’s accredited athletes in Paris 2024 hail from Alberta?