Chance of showers in otherwise sunny economic forecast

Expect a mix of fair and foul in the forecast, a noted economist told local manufacturers in Red Deer on Tuesday.

ATB economist Todd Hirsch talks about next year’s economic forecast to the Central Alberta Rural Manufacturers Association Tuesday.

ATB economist Todd Hirsch talks about next year’s economic forecast to the Central Alberta Rural Manufacturers Association Tuesday.

Expect a mix of fair and foul in the forecast, a noted economist told local manufacturers in Red Deer on Tuesday.

Labour pools will tighten up while transportation costs and rising wages in China may open new opportunities for domestic manufacturing, Todd Hirsch, senior economist for ATB Financial, said in his address to members of the Central Alberta Rural Manufacturers Association.

He used a weather analogy to describe what Albertans can expect from their economy in the months to come.

“Alberta’s economy — 2011 — sunny with a chance of showers. It is going to be an improvement from 2010, but there may be certain parts of the economy, certain industries, that are still going to feel fairly sluggish, particularly that natural gas side,” said Hirsch.

While prices for conventional oil have remained fairly stable, an oversupply and lack of demand from industry in the United States will hold natural gas at under $4 per gigajoule. Alberta producers need that price at around $6 or $7, he said.

“That remains the single biggest problem in 2011,” said Hirsch.

He described a much brighter picture from the oilsands, which he predicted will continue to be the main driver of the Alberta economy.

“If there is some unpleasantness . . . it is on the environment.”

The challenge for oilsands producers will be to convince Albertans and the world that the actions being taken to protect the environment are improving and perhaps those efforts need to be redoubled, said Hirsch.

On the labour side, Alberta has recuperated only about half the jobs lost during the recession. Those workers who have remained employed are more skilled, more competent and more motivated than those who were shown the door, he said.

“If you were still working in 2009 and made it through the worst recession we’ve seen in 26 years, you are very motivated to be at your job.”

The impact has been that employers are able to step up production without hiring more people. However, employers and the associations to which they belong will need to step up their efforts to attract and retain skilled people, particularly in trades, as the economy gains strength, said Hirsch.

Contractors can expect changing patterns in non-residential construction, including office and institutional buildings.

Calgary is now overbuilt, so is not likely to add any more commercial buildings during the next few years, said Hirsch.

Future construction projects are going to be in the area of institutional buildings and infrastructure.

Residential construction has cooled since March and will likely remain cool during 2011, he said. Prices for existing will soften from five to 10 per cent over 2011, depending on location within the province.

“I do think it will be places like Calgary that will get hit a little bit harder. You can almost scale it from north to south.”

Prices will remain strong in Fort McMurray, but will soften moving further south, said Hirsch.

Farmers are also getting a mixed bag, with beef producers facing softening markets while prices for field crops are improving significantly, he said.

Tim Creedon, executive director for the Red Deer Chamber of Commerce, said insight from people like Hirsch is invaluable in helping his organization decide where it needs to focus its resources to help member businesses chart their course for the future.

For example, the Chamber is now developing strategies to help employers recruit and retain the people they are going to need. Red Deer’s unemployment rate has fallen to five per cent, which is considered to be a balance, said Creedon.

bkossowan@bprda.wpengine.com