Energy has gone from Alberta’s economic engine to its backbone: ATB

ATB Financial’s chief economist told a Calgary audience the energy industry has gone from Alberta’s economic engine to its backbone.

Todd Hirsch told the crowd of 1,500 that the city’s economy is moving forward by evolving rather than recovering from the latest economic recession.

He said when a barrel of oil was $100, oil and gas was fueling wage growth and employment, but it’s different five years later.

“There has been some hiring, but wages are lower in the energy sector, there is some investment coming back, but not at rates we saw in 2012, 2013,” he said. “A backbone, which is very important to an economy like it is to the human body, but it’s not the growth engine fueling every day ahead and the black hole that pulls everything into its own gravity.

“A backbone is actually a healthier role I think for the energy sector to be playing because it does allow for diversity.

Hirsch spoke during a presentation with the Conference Board of Canada and Calgary Economic Development regarding the provincial and city outlooks for 2018.

According to the board, Calgary’s economy is increasing 4.6 per cent this year and projecting a more modest growth next year at 2.1 per cent, along with a provincial average of 2.0 per cent.

“Alberta’s gone from the back of the pack the last two years, a really painful recession, to the leader, you’re now the strongest growing province this year,” senior fellow with the board Glen Hodgson said.

Hodgson noted that comes with a muted commodity price recovery, but he hopes for more balance next year.

“This year it’s way too much the consumer, not enough private investment,” Hodgson said, adding he agreed with Hirsch’s analogy. “Shifting and thinking about that as a foundation and then diversifying the sources of energy is probably a good metaphor.”

Both agreed the biggest risks to the local and provincial economies are the NAFTA negotiations.

“That could take a lot of growth, a lot of steam because it’ll rupture confidence, both for consumers and investors,” he said, adding while Calgary has an advantage because the U.S. is still consuming oil and gas products, the city is still exposed.

“Alberta and Calgary would be affected by ripple effects if B.C. or Ontario are affected,” he said.

Calgary Economic Development CEO Mary Moran said along with uncertainty around NAFTA and regulatory processes, the focus has to stay on technological advancements.

“Not happening down the road, they’re happening today,” she said. “The reality is that we have to get comfortable with dealing with uncertainty and I think we’re really good risk managers, but we’re not necessarily good with dealing with uncertainty.

“Compared to a year ago, I think we’ve made quantum leaps.”