What's the Script for Alberta's Economy in 2012?

12/16/2011

Coming hot on the heels of the worst global economic downturn in our generation, 2011 was supposed to be a year of relative calm and stability for the world.

It turns out that it didn’t go very much to script! Debt ceiling crisis in the United States, financial turmoil in Europe, and even worries in Asia’s emerging economies punctuated the economic headlines around the world in 2011. Hardly a year of relative calm.

Alberta, on the other hand, bucked the global trends with an economy that actually picked up steam over the year. The provincial labour market added approximately 100,000 new jobs (+4.8%)—all of them full-time and in the private sector. Other indicators such as retail sales and manufacturing pointed towards an economy definitely on the mend from the downturn in 2008-09.

The primary factor driving the recovery was without question crude oil. With prices ending the year near $US 100 per barrel, the province’s energy sector is in very good shape. Activity in conventional drilling and the oilsands led the charge (while natural gas prices remained weak). A very strong year for agriculture added to the overall optimism in 2011.

Of course, a big economic news maker in 2011 was the delay of the Keystone XL pipeline. Sidelined in the US for political reasons, the delay does put Alberta in a new and interesting situation. What is significant about this event is that it heralds the beginning of a new era in which building pipelines is now much more difficult. This poses a new level of risk.

What lies in store for Alberta in 2012? Although the province did seem somewhat immune from the global softness in 2011, the fate of the province’s economy in the coming year still depends on what happens elsewhere.

The US economy could be hobbled in 2012 by its ongoing problems in the labour and housing markets. Sure, the unemployment rate did fall encouragingly below 9%, but that was driven more by discouraged workers dropping out of the job hunt, rather than new jobs being created. Not much of a ringing endorsement of labour market strength.

The housing market remains mired in the mud with prices, starts, and sales all flat. Political rhetoric was bad enough in 2011 with the debt ceiling talks, but it could intensify in 2012 leading up to November’s presidential election. All of these factors combined point to slow economic growth at best for America.

Europe will continue to dominate global headlines as any resolution to government debt problems—perhaps with a tighter fiscal union across the continent—will take time to implement. The emerging economies of China and India will remain at the top of the global growth totem pole, albeit at a slower pace.

All of this puts the Canadian economy (and to a certain extent, Alberta’s economy) at risk. As a very trade-dependant nation, we remain captive to the economic state of our global trade partners—particularly the United States. With their economy stuck in neutral, it may be a tough slog for Canadian exporters.

So what is the economic script for Alberta in 2012?

The situation in this province will remain highly unique. With relatively less exposure to consumer-oriented manufacturing than central Canada, and with oil and agricultural composing the vast majority of our exports, Alberta’s economic vulnerability is on the commodity side. And while we export very little oil or grain to China, that country’s fortunes in 2012 could be the make-or-break for Alberta. If China’s economy starts to show serious signs of slowdown (or worse, recession), oil and other commodity prices are likely to plunge, leaving Alberta in trouble.

The most plausible scenario in 2012 looks like this: the American economy will be soft, but not in recession; Europe will enter a credit-crunch led recession, but the fallout will be felt less severely on this side of the Atlantic; China and India will see some moderation in growth, but won’t touch recession. Commodity prices—particularly crude oil—should remain solid. Oil will continue to trade in the range of $US 80-100 per barrel, which will leave Alberta’s economy in very good shape.

A less plausible (but not impossible) scenario sees extreme financial turmoil in Europe, leading to the collapse of its currency and banking system. This would be enough to drag the US into a credit-crunch recession. And if Europe and the US are both in deep contraction, China will get dragged down too. Crude oil would get pushed to $US 60 or lower.

And what THAT scenario would do to Alberta is too unpleasant to ponder this close to Christmas!

1 Comment

detroit

2/19/2012 12:18:50 pm

I left the US in 2001 to live in Asia. Every time I return to America, I see the USA getting worse. I am angry, shocked, surprised, saddened, disappointed, and disgusted by the changes I see.

When I leave from a sparkling new modern Asian airport like Hong Kong, Seoul, or Shanghai and land at a run down American airport like LAX that has faded signs, broken water fountains, and a decor that looks like it hasn't been updated since 1984, I feel like I have arrived in a 3rd world country.

I see Americans getting fatter.

I see more laws in the USA that outlaw everything from baggy pants to sex tourism to artificial turf to feeding the homeless to banning fast food restaurants.

I see the end of freedom in the US. Americans can now be added to no fly lists. The US Constitution has been overruled by the Patriot Act that has legalized wiretaps without a warrant and allows the government to deport and strip any American of his or her citizenship. Does that sound American to you?

http://articles.latimes.com/print/2011/jun/02/news/la-pn-patriot-act-alarm-20110602

The prison at Guantanamo has been opened to detain and torture suspected terrorists indefinitely without trial.

http://www.boston.com/news/nation/articles/2009/06/25/human_rights_chief_appeals_to_us_on_guantanamo_inmates/

The US now has a secret panel “kill list” of Americans who are targeted to be assassinated without a trial.

http://www.reuters.com/article/2011/10/05/us-cia-killlist-idUSTRE79475C20111005

President Obama recently signed the National Defense Authorization Act that allows the indefinite detention of any American or foreigner accused of terrorism without trial by the US military on US or foreign soil.

http://www.forbes.com/sites/erikkain/2012/01/02/president-obama-signed-the-national-defense-authorization-act-now-what/

I see a higher unemployment rate and more welfare. I see jobs have been offshored to cheaper countries, more jobs lost to technology, and the US flooded with illegal immigrants that take American jobs, don't pay taxes, and drain government resources.

I see indebted Americans who bought more than they could afford and a broke US government that has lowered taxes, but increased spending on unnecessary wars.

Looking at the history of Rome, Nazi Germany, and the United States, I see some disturbing parallels:

1. While becoming a superpower, Rome abandoned the very values with which it had won its supremacy.

2. Roman rulers used “self-defense” pretexts to invade other countries, with hawks criticizing doves for not being patriotic.

3. War benefited the Roman elite before the masses.

4. Wars were sold as about liberty and justice defeating tyranny.

5. The aggressor nation stated conditions to avoid war that are impossible for the opponent to comply with.

6. Powerful Romans hated to make concessions. They would have rather fought to the death instead of giving in to the the demands of citizens. The elite felt that they earned it, even though they used corruption to amass their wealth.

7. Romans became weak and lazy because the masses were given free bread and circuses.

8. The people seen as “barbarians” gradually wore down the empire, causing it to spend itself into bankruptcy.

In Nazi Germany, the Reichstag burned in 1933. In the USA, the World Trade center was attacked in 2001.

Nazi Germany passed the Enabling Act that gave Hitler dictatorial powers. The US now has the Patriot Act.

Nazi Germany opened Jewish concentration camps. The US has opened the Guantanamo Bay detention camps.

Germany invaded Czechoslovakia and Poland. The US invaded Iraq and Afghanistan.

Americans should not just be concerned by the recent changes in the US, they should be outraged. We need to get our country back.

I suggest that we start moving the US in a better direction by doing the following:

1. Americans would be more healthier and better looking if they just started eating
less and exercising more.

2. The US really needs to end the very scary and obvious movement that is banning freedom, increasing nanny state laws, and expanding the creation of a military socialist dictatorship. Even if politicians says they won't use unconstitutional laws on the books now, doesn't mean that later officials won't. Americans that stay silent while illegal laws are enacted should not depend entirely on the Supreme Court to protect their rights because courts once protected slavery, segregation, and concentration camps as well. The time to protest unconstitutional laws is before they are enacted. Americans cannot naively believe a dictator like Hitler or Stalin will never seize power in the US.

If America has no freedom, criticizing countries like China or North Korea is hypocritical.

Everyone opposes terrorism, but if you want to prevent terrorism, give suspected terrorists a trial, improve airline security, and don’t give out visas easily. Terrorism should not be an excuse to declare war

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What's the Script for Alberta's Economy in 2012?

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