Why Alberta's economic 'recovery' feels so different this time
The GDP is booming and jobs are coming back yet things are not returning to what they once were
By Robson Fletcher, CBC News Posted: Jan 10, 2018 5:30 AM MT Last Updated: Jan 10, 2018 5:30 AM MT
About The Author
Robson Fletcher joined the CBC Calgary digital team in 2015 after spending the previous decade working as a reporter and editor at newspapers in Alberta, British Columbia and Manitoba.
Just say the words "economic recovery" in Alberta and watch how some people get their backs up.
There's a palpable tension in this province when talk turns to the end of the recession, which, by all objective measures, is indeed over. After two painful years of contraction, Alberta is now widely expected to lead the country in GDP growth.
Add to that the latest employment data, which blew away even the most optimistic projections. Statistics Canada said the province gained 26,000 jobs in December, most of them full-time. Believe it or not, more people are employed now than before the oil-price crash.
And yet, utter that word — recovery — and, well, it just doesn't feel right.
Because it's not, strictly speaking, what's happening.
When a recovery isn't a recovery
A recovery is a return to a previous state. To recover is to regain what was lost. But the hard truth, analysts say, is Alberta's oil industry — the bedrock of the economy for so long — will never be the same as it was before the crash.
The recession forced employers to trim the fat, and they found plenty to cut. The industry emerged from the recession lean, and maybe a little mean. The human cost amounted to 2,400 layoffs per month, every month, for a year and half.
As hard as it may be to hear, some of those jobs probably never needed to exist in the first place.
And yet, today, some workers are finding the tables have turned back in their favour. Labour shortages in certain sectors have employers desperately seeking help. Technological advancements that made old jobs obsolete hold promise to create brand new ones. All while employment grows even faster in other parts of the economy.
So what does "recovery" mean, in this context?
Different jobs. New skills. A changed industry.
And maybe — just maybe — a glimpse of that long-elusive goal: diversification.
Peaks of the past
The latest job numbers look encouraging on the surface, but drill deeper and you'll unearth a fault line.
Take a look at the the red line in the graph below. It shows total employment in the province over the past five years.
Now take a look at the blue line. It depicts jobs in oil and gas, which remain well below their 2014 peak.
And while there have been some recent gains, few analysts expect all those jobs to come back any time soon — or ever.
Todd Hirsch, chief economist with ATB Financial, offers a blunt assessment of the high-paying jobs that used to abound in Alberta's oil patch.
Hirsch said it's a "widely accepted truism now" that companies overhired — and overpaid — in 2013 and 2014. Then, when the price crash came, many of those jobs had to go.
"The reality, and it's kind of a harsh reality, is a lot of them were unnecessary," he said.
Hirsch believes this was a natural consequence of a "very competitive environment" for workers as firms raced to expand in an era of $100 oil.
But today, we're in a new era.
Oil is back, but different
"The reality is, it is a different industry going forward than it has been in the past," said Carol Howes with PetroLMI, an industry group that studies the labour market.
In a report released late last year, PetroLMI said it was "highly unlikely that Canada's oil and gas industry will rehire all of the workers downsized since late 2014."
Jobs in petroleum exploration and production remain hard to come by, the report found, meaning no recovery for engineers, geoscientists, and those on the business and operations side of things.
It's a different story for skilled and semi-skilled field personnel. But many of those people have left the industry — or the province — in search of better opportunities.
That, paradoxically, has led to labour shortages in some parts of Alberta.
This, despite innovations that make it easier to extract oil with fewer and fewer workers.
More oil from fewer people
Mark Salkeld, president and CEO of the Petroleum Services Association of Canada, said advanced drilling rigs, remote monitoring systems and automation are increasingly common in the field.
He said a hydraulic fracturing crew that used to require 30 workers — one on each pump — can now be handled by just two people and some remote controls.
At the same time, little job growth is expected in the oilsands, as the sector changes tack.
After years of expansion, Howes said, major players are now adjusting their focus. Rather than investing big money in future projects, they're bringing projects that have been under construction for years online, and aiming to extract as much oil as possible.
So while oilsands output (the yellow bars in the graph below) is projected to grow for the next several years, only a small amount of growth is expected in employment (the blue line).
This may all sound like doom and gloom, but Howes said some job growth is better than none.
"While we may not be expanding at a dramatic pace like we have in the past, there will still be a lot of opportunity," she said.
"But the jobs will be different."
Mining a new resource: data
Alongside petroleum and natural gas, rig crews are also extracting a new resource from the ground these days.
"We're pulling data out of the hole as we're drilling, in real time," Salkeld said.
"And there's just volumes and volumes of information coming out."
That data fuels the automated systems that control modern oil extraction and guides decisions made back at the head office. Knowing how to handle this valuable new resource will be a key skill in the future, and Salkeld expects opportunities will abound for programmers, data analysts and field workers familiar with digital technologies.
He also expects continued job growth in clean technology that reduces the industry's environmental impact.
In fact, he plans to take his own career in that new direction.
After seven years at the helm of the petroleum services association, he's leaving the position in March to take a job in clean tech.
"It just seemed like the timing was right," he said.
So if oil and gas hasn't been leading the way, where have all these new jobs in Alberta come from?
The biggest growth has been in manufacturing, which added 18,000 positions over the past year. That was followed closely by retail and wholesale trade, with 16,000 new jobs. The financial, insurance and real estate industries kicked in another 11,000.
The resource sector had a relatively strong year, too, with 12,000 new jobs in the past 12 months. But that's still 19,000 fewer than three years earlier.
And this gets at the heart of why this "recovery" feels so different.
Alberta has been through booms and busts in the past. Price crashes have routinely taken jobs down with them, but they've always bounced back. For some historical context, consider this one final graph.
Resource-sector jobs plunged 24 per cent in the late 1990s but were back to their previous peak in three and a half years. Recovering from the 2008 financial crisis — and accompanying free fall in natural gas prices — took just a little bit longer, but still clocked in at under four years.
Today, by contrast, we are three and half years into the latest crash, and haven't even recovered half of the resource jobs we once had.
And yet, total employment is back to where it once was in 2014.
Economists are still watching how this will all play out.
Hirsch believes it just may be the beginning of the economic diversification that Alberta has talked about for so long.
"You see evidence of it happening," he said. "But it hasn't happened yet in a convincing way."
So while oil and gas may not be roaring back, it has been moving in a new and upward direction, and Alberta along with it. We don't know exactly where that will take us, but it won't be to the same place we once were.
In that sense, Alberta hasn't recovered from the recession. It has adapted.
Calgary: The Road Ahead is CBC Calgary's special focus on our city as it passes through the crucible of the downturn — the challenges we face and the possible solutions as we explore what kind of Calgary we want to create. Have an idea? Email us at firstname.lastname@example.org
Articled from the CBC RSS Syndication CBC.ca - RSS Feeds Copyright is that of their respective owners (CBC) Calgary News Releases
Copyright 2014 WestNet-HD Action News