Friday’s jobless rates released by Statistics Canada confirmed what many already knew, Alberta’s economy has taken a hit this winter. Reporting on the figures, the Calgary Herald announced that overall, Canada lost 5,700 jobs in January. Ten thousand of those jobs came out of Alberta, representing the province’s highest unemployment rate since 1996. Calgary’s unemployment hit 7.7% up 1% from the same period in 2015.
Even these figures don’t reflect the worst of the unemployment situation in Alberta as many of full-time jobs were replaced with part-time ones. It has been estimated that in that last 18 months, Alberta has lost 40,000 oil industry jobs.
Oil Industry Slide Continues in 2016
The worst may be yet to come for the oil industry, in early February, Suncor Energy reported a fourth-quarter loss of $2 billion in 2015. The Loonie’s weakened condition triggered a charge of $382 million to contribute to that $2 billion total. Imperial Oil reported 36% lower fourth-quarter earnings. In addition, Alberta continues to push forward with a plan to phase out coal power generation entirely by 2030. On February 4th, US Oil Sands Inc. announced that due to the challenging environment facing the industry, it will slow construction on the PR Spring Project in Utah.
In an effort to shore up the area’s natural resource industries, Alberta has vowed to provide $500 million to subsidize new petrochemical plants. The goal of this program is to diversify the province’s energy industry beyond extraction and into new areas of use for the region’s vast fossil fuel resources.
An Exchange Rate Fueled Buyers’ Market
Meanwhile, outsiders may be looking with a keen eye toward Canada’s thriving business assets as the Loonie’s continued weak position makes for a favorable purchase price. Last year’s crude oil price drops and low-interest rates led to a depreciation of the Canadian dollar and no relief is expected soon.
In 2012, U.S. home-improvement company Lowe’s attempted to purchase the popular Rona, Inc. Canadian home-improvement chain to no avail. February 3rd, Lowe’s announced that a deal had been made to purchase Rona, Inc. for $3.2 billion ($2.3 billion U.S.) The good news is that Rona, Inc. stockholders will benefit from an offer that represents double the pre-announcement stock price assuming the deal wins the approval of the Competition Bureau. It remains to be seen what the impact of visiting and transferring executives will have on the Calgary rental market.
Increased Down Payment Requirements May Mean More Calgary Homes for Rent
Adding to the economic malaise and hitting the wallet of Canadians that still have a job, new mortgage lending rules go into effect this month. Beginning February 15th, home purchasers seeking a mortgage for homes valued at between $500,000 and $1,000,000 will have to come up with extra funds for the down payment. Previously, a down payment of 5% was sufficient to qualify for high-ratio mortgage insurance on these purchases. Now, to receive loaned funds over $500,000 will require an additional 10% down payment on those amounts. This is expected to dampen the housing market in cities such as Calgary where more homes within the city and surrounding region are priced in this $500,000-$1,000,000 range.
In a recent interview with CBC regarding Calgary homes for rent, Citysearch’s own Lisa Hamielec advised owners of high-end properties to consider waiting out the current economic downturn by renting rather than selling. She also noted that while high-end properties continue to be in demand, Calgary home rental rates have dropped and buyers can take more time to choose just the right property.
Steadfast and Resilient
There can be no doubt that the economy is in the midst of a correction. However, there should also be no doubt that with focused investment and targeted skill building, Alberta and Canada can emerge from this slump stronger than ever. New resource-use technologies and growing development of telecommunications, service, and other industries promise growing returns in years to come.