Albertan downturn causing rise in personal insolvencies

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More dark economic clouds are gathering over Alberta, adding to the challenges ahead for a new premier and cabinet as they prepare to take the reins this weekend.

Three ugly statistics were posted in the past week: increases in personal insolvencies, proposed insolvencies and the number of people receiving employment insurance benefits.

Personal insolvencies climbed 6.5 per cent during the six months ended February, 2015, according to Canadian Imperial Bank of Commerce. That is the province's worst streak since the recession in 2008 and 2009. By way of comparison, the national insolvency rate climbed 1.2 per cent, the first increase since the recession.

And it may get worse.

"Zooming in on the situation in Alberta, there are reasons to believe that the coming quarters will see continued deterioration," CIBC economist Benjamin Tal wrote in a note this week.

The number of insolvency proposals – essentially, the number of people negotiating with their lenders in hopes of avoiding insolvency – rose 24 per cent over the same six months and 30 per cent when smoothed year over year, Mr. Tal calculated. "And given that the share of proposals in bankruptcies is the highest in Alberta – that trend is likely to lead to a higher insolvency rate in the coming quarters."

However, the numbers must be put in context: "You have to remember: The numbers are rising quickly, but the absolute level [of insolvencies and proposals] is still very low," the economist said in an interview.

So while Albertans can blame low oil prices for their financial troubles, years of strong prices are serving as a cushion. The North American benchmark price for a barrel of oil closed at $59.72 (U.S.) Friday. Oil dropped below $100 a barrel at the end of last July, and bottomed out at $43.39 in the middle of March, 2015. Before this slide, oil last traded below $75 a barrel in September, 2010.

The damaged bank accounts are coupled with a bleak job market. The number of people receiving employment insurance benefits in Alberta hit 38,800 in March, up 8.9 per cent compared with the prior month, according to Statistics Canada. This marks the province's fifth consecutive monthly increase. The national average for people receiving jobless benefits climbed 1.1 per cent in March compared with February.

Alberta's woes are about more than job losses.

They are about the little things, such as bed sheets in work camps in the oil sands being changed only once a week rather than a few times each week. They are about financial benefits beyond paycheques, as seen by oil and gas companies axing complimentary flights for employees to places such as Toronto, opting to pay for just the jump between Fort McMurray and either Edmonton or Calgary. And they are about employees across western Canada wondering if such perks are gone forever.

One heavy-machinery operator in the oil patch lost his job last fall and sent out about 500 résumés over the winter, hoping to get back in the game. He landed a job this spring. The man, who asked not to be identified because he is worried he may lose his job for speaking with the press, had to settle for less pay and a job that is about three rungs below his level of experience.

"It is definitely an employer's market out there right now," he said. "Nobody has job security."

All this comes as premier-designate Rachel Notley and her New Democratic Party prepare to take over government benches in Alberta's Legislature.

While the province's economic downturn precedes her, many business leaders are fretting that she will exacerbate the situation. The naysayers are focusing on her election campaign promises to increase corporate taxes by 2 per cent; review Alberta's energy royalty structure; and increase the minimum wage to $15 an hour – from $10.20 – even though the province's official minimum wage means little when energy prices are healthy.