Dire start to 2016 for Albertans, Crown-owned bank predicts
An oil sands facility seen from a helicopter near Fort McMurray, Alta., on July 10, 2012. (THE CANADIAN PRESS/Jeff McIntosh)
John Cotter, The Canadian Press
Published Thursday, January 14, 2016 1:32PM EST
Last Updated Thursday, January 14, 2016 3:31PM EST
EDMONTON -- Alberta's Crown-owned bank is predicting the first six months of this year will be the roughest yet in the current economic downturn.
ATB Financial is forecasting the petroleum industry will continue to shed jobs due to the unrelenting drop in the price of oil, with Fort McMurray and Calgary taking the hardest hit.
"We do see the first half of 2016 probably being the toughest months of this recession for Albertans," ATB chief economist Todd Hirsch said Thursday.
"We will see more contractions in the economy, we will see more layoffs and that will add to a heightened unemployment rate."
Hirsch said the provincial unemployment rate could climb to eight per cent from seven per cent by the middle of the year.
Alberta's unemployment rate in January 2015 was 4.7 per cent.
The ATB report forecasts weaker consumer demand for housing and retail products. It also says it is possible that more people will leave Alberta than move to the province.
Hirsch said the economy is expected to start turning around by the end of the year.
"By the end of 2016 we do see some of these heavy clouds of pessimism start to lift off the province, but the first half of the year will be tough for a lot of people."
The ATB report comes a day after Alberta's NDP government announced a freeze on the salaries 7,000 public sector managers for two years in the face of dropping oil and natural gas revenues.
The salary freeze is expected to save the province $57 million.
Opposition critics have called the measure a drop in the bucket when Alberta is forecasting this year's budget deficit to be $6.1 billion.
Hirsch declined to answer questions about the government's handling of the economy.
He said any jurisdiction that depends on petroleum revenues right now is suffering, including Saskatchewan and Newfoundland and Labrador.
Despite the gloomy forecast there are some pockets of optimism in ATB's economic outlook.
The report says other sectors of Alberta's economy, such as agriculture, forestry and tourism, are doing well, due in part to the weak Canadian dollar.
But Hirsch said even when measured together, their effect on the economy will not offset the steep drop in the price of oil.
"It is important to remind ourselves that there is more to Alberta's economy than petroleum, but we do have to bear in mind that the petroleum sector is the dog that wags an awful lot of tails in this province."