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Alberta's economy demonstrating remarkable flexibility despite recession

Democracy shows up in all sorts of places and times in Alberta, and one of the least known acts of democracy took place in 1977.

Democracy shows up in all sorts of places and times in Alberta, and one of the least known acts of democracy took place in 1977. In that year, school children across the province voted for what would become the official bird of Alberta: the Great Horned Owl. (Full disclosure: as a kid in school at the time, I voted for the Blue Bird, which came in third.)

What was probably lost on the school kids in 1977 is that the Great Horned Owl may just be a very appropriate symbol for the provincial economy. As most bird enthusiasts know, owls are famous for their extremely flexible necks, giving them the ability to rotate its head up to 360 degrees without moving its body. This is a very handy skill when quietly locating prey.

Alberta’s economy has demonstrated some of its own flexibility coming out of last year’s recession. Considering the magnitude of the downturn, it’s quite astounding that Alberta has been able to snap back the way it has.

This is particularly true of the labour market. True, as a percentage of its workforce, Alberta did shed more positions than anywhere else in the country. But with an economic contraction of more than five per cent in 2009 (the worst in nearly three decades), the unemployment rate shot up to a high of only 7.5 per cent in March of 2010. Compared to the low point of 3.2 per cent in June 2008, that is a pretty big jump. But perspective is everything. I’d dare anyone to complain about a 7.5 per cent unemployment rate to people in Spain, where the rate is 20 per cent, or even closer to home like in Windsor, Ontario, where 12.7 per cent of folks are jobless.

Alberta’s labour market has shown some amazing resiliency, and no small part of that is because Albertans know how to find ways to adapt and get by when regular jobs or income are scarce.

Consider the number of self-employed in Alberta. This figure tends to jump regularly during recessions, and 2008-09 was no exception. Between early 2007 and early 2010, the number of self-employed in Alberta rose by nearly 40,000, which is more than two per cent of the labour force. That is considerably more than the increase of self-employment across the country during the same period (around 1.7 per cent).

Speaking with industries that were the hardest hit during the downturn, like oil and gas field service companies, their stories were all the same: they found whatever work they could, even if it meant venturing out of their traditional sources of income. Natural gas drilling activity was and remains very weak in 2009, so companies that concentrated on service provision for gas companies found other avenues, such as metal fabrication for oil drilling activity, or even other non-energy related industries. One pipe welder I spoke with was picking up some lucrative business in welding hitches onto horse trailers.

The point is that Albertans are resourceful and adaptable. To be sure, many of the newly “self-employed” may prefer not to be, and would gladly take back a regular job with benefits and a guaranteed pay cheque if they had the option. But if it is not the option, they find ways to cobble something together and somehow make it work.

The adaptability and flexibility of the economy has also shown up in the energy sector. Because of the dominance of the energy patch, Alberta is not a terribly diversified economy. However, there is a growing diversity within the energy sector that is helping the overall economy weather the nastiest storms. When oil and gas prices collapsed in 2009, drilling activity did grind very close to a complete stop. But investment in the oilsands only slowed, with most projects being postponed rather than scrapped altogether.

As well, new non-conventional oil plays, such as the Cardium region of west central Alberta, has been ignited with new horizontal drilling technologies. The conventional oil and gas in the province, which is now mostly mature and not likely to produce much growth in supply, is not the end of the game. Because the energy sector is more flexible and adaptable than it was 20 years ago, it is much better able to stickhandle through the rapidly changing environment.

None of this is to say that Alberta’s economy hasn’t suffered. No one in this province wants to relive 2009. But because of a more flexible labour market, and because of greater adaptability within the energy sector, the worst recession in a generation really didn’t feel all that bad.

Just like the Great Horned Owl, it appears Alberta’s economy knows how to use flexibility to its advantage.

Todd Hirsch is chief economist with ATB Financial.


Airdrie Today Staff

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