Alberta’s economy is dipping, but its labour force is staying put

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Todd Hirsch is the Calgary-based chief economist of ATB Financial, and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.

Now in the grips of a second year of contraction, Alberta has gone from the hare to the tortoise of Canada's economy. It's by no means the first time the province has found itself on the wrong side of the resource price collapse; once again it finds itself too heavily reliant on a single industry and commodity.

In the past, the province's labour force reacted to recessions with greater elasticity – when the jobs disappeared, so did the workers. The current downturn, however, is proving to be different in many ways. Curiously, Alberta's workforce is not contracting nearly to the extent that it has in the past.

The accompanying graph (see bottom) shows the year-over-year per cent change in the number of Albertans over the age of 15 who are working or looking for work. The nasty recessions of the 1980s saw tens of thousands of people pack up and leave Alberta, resulting in a drop in the size of the workforce. During the darkest days of 1987, the province saw more than 1.2 per cent of its workers leave or drop out of the labour market. This repeated itself during the recessions of 1992 and 2009-10.

This time around, however, the labour force has held its ground. It did dip briefly to a year-over-year loss of -0.2 per cent in May of this year, but in July the size of the workforce was actually greater (+0.4 per cent) than a year ago.

What's different about this recession that has enabled Alberta to hold onto people, even if they're out of work?

The main reason has been net interprovincial out-migration, which has (so far) amounted to only a trickle. Over the last two quarters for which data is available, the province did lose people – but only a net loss of 2,800. That's a fraction of the 140,000 net gain the province enjoyed over the previous five years. The job market in the rest of the country is lacklustre, especially in Ontario. Unemployed workers could leave Alberta, but their job prospects are not particularly better elsewhere, except in British Columbia.

Another factor could be the addition of new entrants to the job market because of falling household income. A few years ago, employment earnings in Alberta were so strong that it was increasingly possible for households to have only one income-earner, allowing the other adult member to stay home. This was especially true in Edmonton, which saw its participation rate actually fall during the strong economic recovery of 2010.

But with the number of layoffs in 2016, some of those formerly stay-at-home Albertans are being pulled back into the job market simply to supplement falling household income. The increase in part-time jobs across the province suggests that this could be the case.

A third factor supporting the size of Alberta's labour force comprises the other two components of population growth: international migration and natural population growth. These have remained strongly positive for Alberta, even while interprovincial migration has turned negative. Over 54,000 international migrants arrived in Alberta over the last four quarters, accounting for nearly one in every six new migrants to Canada. That's greater than Alberta's 11.7-per-cent share of the national population. And Alberta's birth rate has outpaced the national average for years, resulting in more teenagers entering the job market today.

The stable size of Alberta's workforce during the recession is a mixed blessing. Surely holding on to a cache of available workers is positive for employers who, before too long, will start looking to hire once again. And a stable population supports the housing market, retail sales and other consumer-driven sectors.

On the other hand, it has been responsible for the unemployment rate shooting up to a painful 8.6 per cent last month. A greater number of people looking for work increases the competition for scarce jobs – and for many out-of-work Albertans, that's the problem.