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Monday, June 22, 2009
When Calgary’s energy sector suffers, so does the entire economy: CED report
Calgary is in a recession that will last well into 2010. That’s the conclusion of the Calgary Economic Development (CED) State of the Economy report for the first half of 2009 released today.
According to the report:
Calgary has been negatively impacted by the global economic downturn, as has every other centre around the world. Global demand for energy commodities has been reduced to the point of overall negative growth, resulting in prices dropping from the highs of 2008. As a result, Calgary energy companies have had to make the difficult decisions to cut capital expenditure, and have seen a dramatic drop in demand and revenues. This has resulted in a reduction in employment in the oil and gas sector, as well as employment along the entire value chain of energy including finance, legal, consulting and products and services. All of this has had a significant ripple effect throughout the whole economy, particularly in the labour market.
When Calgary’s energy sector suffers, so does the entire economy:
- EI claims have risen a dramatic 187 per cent as of March from the same time last year;
- Calgary’s unemployment rate has risen to 6.6 per cent, the highest since May 1997;
- Housing starts year-to-date for May 2009 are down 78.6 per cent from the same time in 2008;
- Building permit values year-to-date for April 2009 are down 51.4 per cent compared to the same time last year;
- Downtown office demand continues to soften as absorption remained negative for Q1 2009, reflecting a significant return of space to the market in sub-lease state. This has driven the overall downtown vacancy rate to 6.9 per cent;
- Bankruptcies in Calgary have increased 81 per cent from Q1 08 to Q1 09, attributed to consumer bankruptcies;
- Mortgages in arrears in Alberta have grown nearly 130 per cent March 2009 over 2008.
Posted by Matthew Johnston
Posted by westernstandard on June 22, 2009 | Permalink
I wouldn't worry too much about Calgary. The tax regime in Alberta will continue to stimulate growth long term. And all that printed money has to go somewhere. As soon as velocity starts picking up I'm putting a bet on oil (amongst other things).
Posted by: Charles | 2009-06-22 11:52:30 AM
If someone said this about Toronto, it would be a national calamity. Iggy and Taliban Jack would be up in arms calling for immediate relief. What a country.
Posted by: Zebulon Pike | 2009-06-22 12:21:21 PM
The situation in Calgary has more in common with 1985. As you'll recall two Alberta based banks (Northland and Continental) went bankrupt that year. Since then no new banks have been chartered that are based in Alberta. The Canadian government realized that it was best if the banking sector was run by people who knew what they are doing. Were it not for the banking expertise of the "Big Five" who happen to be in Toronto, the situation today in Calgary and Alberta would be catastrophic.
Posted by: The Stig | 2009-06-22 12:28:11 PM
Charles, as long as demand is low, and the cost of production/exploration is high, there will be no recovery. I really do hope I'm wrong, since I work in the industry.
One of my biggest clients has decided to quit paying. Unfortunately, they made this decision about a month before they decided to quit ordering work. I have a few $ in invoices that I'm fighting to recover. Meanwhile, the company president is proudly throwing millions at Calgary charities. What about my employees? Do I pay them with my kids education money?
My plan is to get out by summer's end. I should have gotten out of the oilpatch 25 years ago.
Posted by: dp | 2009-06-22 12:28:46 PM
Still beating the hyperinflation drum, Charles? Tell me, have you researched the Brazilian hyperinflation yet?
Sorry to hear about your situation, dp, hope the future holds better times in store. As for your non-paying client, I recommend you budget for some goons to beat him into paying up. Pity you won't be able to write it off. :-)
Posted by: Shane Matthews | 2009-06-22 2:18:54 PM
Do you mean write off the bad debt, or the fee for the hired beating?
By the way, I can't say the name of the client, but it's Husky Energy. Not all deadbeats are small potatoes, are they?
Posted by: dp | 2009-06-22 5:21:47 PM
The fee for the hired beating--I'm almost sure "goon expenses" are not deductible. :-)
Posted by: Shane Matthews | 2009-06-22 5:56:55 PM
I'll probably just keep nagging. I don't want to get on the wrong side of some triad. I might end up in a big noodle pot on Center St.
Posted by: dp | 2009-06-22 7:06:42 PM
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