Unemployment in Alberta

The Calgary Herald headline reads, “Jobless rate finally drops in city.”

While such a proclamation would have been apropos after the latest Statistics Canada job numbers were released on April 8, this headline appeared in the October 7, 1983 edition of the paper. A little digging could find many more examples showing that the gloomy mood that prevails today in Alberta was also common 32 years ago.

Over the past 35 years, there have been four periods of sustained negative GDP growth in Alberta: in 1983–84, in 1986, in 2009, and most recently in 2015 (and likely continuing into the current year, although final figures have yet to be released). Each recession was accompanied by a sharp decline in energy prices, and each time there was widespread discussion about the situation being the worst economy the province had ever seen, that “this time” things are different, and that the province would never recover. Plus ça change, plus c’est la même chose.

While the current employment picture in Alberta is indeed bleak, and families in every corner of the province are struggling as a result of the economic downturn, comparing the impacts of this most recent recession to those of the recent past does offer some reason for optimism about the prospects for the provincial economy.

In terms of GDP growth, the most recent recession is not the worst that Alberta has experienced in the last 35 years (Figure 1). Alberta GDP decreased by an estimated 1.8% in 2015, less than the declines in 1983 and 1986, and only about one-third as severe as the 5.5% GDP drop experienced in 2009.

What (may) differentiate this recession is its probable duration, hence the comparisons to the recession of the early 1980s. The slowdowns in 1986 and 2009 were much shorter, with the Alberta economy rebounding more quickly.

Mirroring the anemic GDP growth figures is the unemployment rate. As of February 2016, the unemployment rate in Alberta stood at 7.9%. In January the rate was 7.4%. This was notable because it was the first time since 1988 that the unemployment rate in Alberta was higher than that for all of Canada (Figure 2).

As sobering as those numbers are, the provincial unemployment rate was still two to three percentage points lower than the 9–10% unemployment rates of 1992 to 1993, and much lower than the 11–12% rates in 1983 and 1984. In March of this year, the Alberta unemployment rate rebounded to 7.0%, the same as the national average. While it is too early to ascertain if the economy has begun to turn around, such a figure is reason for some optimism.

Simple unemployment figures, however, could simply be masking the fact that some people may have tired of looking for non-existent jobs and dropped out of the labour force, and therefore would not be counted as unemployed. This decline in labour force participation could underestimate the true unemployment rate. Unemployment rates may also may mask a changing “added worker” effect whereby (normally) women enter the labour force to compensate for their partners’ loss of employment.

This does not seem to be the case, however, as labour force participation rates in Alberta appear to have remained strong (and also continue to be above the Canadian average). Figures 3a and 3b show the labour force participation rates for males and females, respectively, and by age groups since the beginning of 2014 (i.e., preceeding the beginning of decline in oil prices in mid-2014). Aside from the usual month-to-month fluctuations, there seem to be no discernible trends in these data.

Media reports of the current economic malaise often cite sources discussing the nearly unprecedented scale of job loss in Alberta, often accompanied by even gloomier projections of more job losses. Again, the data do not seem to support this (Figure 4). The largest most recent year-over-year job loss was 35,000 jobs in January 2016. This is smaller than the 66,200 jobs lost in 1983 and smaller still than the 80,000 jobs lost in October 2009. Even in February 1987 there were 42,500 job losses. The current economic downturn is often compared to the one of the early 1980s. In March 1983, the month for the worst year-over-year job loss of that recession, almost twice as many jobs were lost as were lost in January 2016. 

To add more texture to these unemployment figures, it is important to know that the size of the Alberta labour force has more than doubled in since 1980. Figure 5 shows a similar pattern to Figure 4, but measures job losses as a percentage of the size of the labour force one year earlier. In January 2016, the labour force had 1.4% fewer jobs relative to a year earlier. This compares to a 5.24% decline in March 1983. In relative terms, the three previous recessions have been much worse for job loss, with the job losses in the early 1980s more than three times larger.

To be sure, some industries have experienced proportionately more severe job losses during the most recent downturn relative to earlier ones. The following four figures show the same data as in Figure 5, but for specific industries in Alberta; mainly industries that are most sensitive to declining oil prices. In each case the blue line is almost identical to that of Figure 5, but on a different scale and only beginning in January 1988, when detailed industry data became available. In each of the four industries under consideration, job losses and gains are much more volatile than for the Alberta economy as a whole.

Figure 6 shows declines in professional, scientific, and technical services, which would include many people who work in downtown Calgary in fields such as engineering, geology, and accounting and bookkeeping. At its lowest point in June 2015, about 11.5% of the June 2014 labour force in this industry had lost their jobs. This is comparable to the 12.2% figure in June 2009, and somewhat worse than the 9.8% loss in May 1990. On a positive note, the most recent month of March 2016 shows growth of 9.4%, but whether this is a blip in the data or the beginning of a positive trend is unknown at this time.

A similar pattern is observed in Figure 7, which shows job gains and losses for the manufacturing industry, an industry that includes the petroleum refining sector. Here relative job losses are similar in the current recession compared to those experienced after the financial crisis. Of some concern is that these jobs do not seem to be recovering, as they appear to be doing in other industries. Again, only time will reveal if this is a low point for jobs in the industry or if this negative trend will continue.

The data for the construction industry (Figure 8) shows very little decline in jobs recently, with a modest recovery in the early part of 2016. This contrasts with the greater-than-11% employment cuts in the industry during the financial crisis in May and August of 2009. Continuing construction activity in Edmonton, as well as residential construction, continue to be relatively strong. However, employment in this industry could worsen once these construction projects are completed, and new housing starts are unlikely to rebound to their pre-recession levels, especially as people continue to leave the province (albeit not to the extent that they left in earlier recessions). 

Finally, Figure 9 shows the mining, quarrying, and oil and gas extraction industry, which includes oil and gas exploration and extraction activities. The recent decline here has been close to 15% at its worst. While significant, this is less than the close-to-20% declines experienced by the industry in previous recessions, and the job losses do appear to be slowing somewhat. 

The point of this brief piece has been analyze the available data to compare the current state of the Alberta labour market with previous economic downturns, as well as to look deeper at the employment changes in industries that have been particularly impacted by the decline in global oil prices.

Compared to June 2014 – the time of the most recent peak price of oil – employment in Alberta has declined by 57,400, according to the most recent labour force survey figures for March 2016. The largest year-over-year drop in employment has been 35,000 in January of this year. This loss of jobs, however, has been smaller than was experienced in the last three recessions in Alberta. Given the fact that the Alberta labour force is much larger today, these latest job losses as a percentage of the labour force are smaller still. Digging deeper into the job losses in four industries that are especially vulnerable to the declining price of oil we see similar patterns, but on a more significant scale.

The social and economic consequences of job losses are real and often very severe for those who have experienced them, and economists cannot yet be sure if the Alberta economy has bottomed-out and will begin to improve. But viewing the current downtown in historical terms does provide for some confidence that the Alberta economy will recover and continue to be strong. The fact that interest rates are low, the housing market is relatively stable, government finances are strong, the Canadian and global economies are starting to gain momentum, and the energy sector is a less important part of the Alberta economy compared to the 1980s, all make the current situation less likely to continue too much longer.

While no one, your humble author included, has a crystal ball, we can learn from looking at what has occurred in the past, and this should result in a somewhat more optimistic outlook for Albertans.

Sources

Photo credit: Government of Alberta under a Creative Commons licence. 

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