Alberta’s unemployment will likely surpass 25 per cent because of the COVID-19 pandemic, Premier Jason Kenney said Tuesday, and that’s without factoring in the full impact of tanked oil demand and prices. That would be double the worst unemployment rate in the province in the last four decades.
“This will be the most challenging period in our economy, in relative terms, since the Great Depression. There’s simply no doubt about it,” Mr. Kenney told an online energy symposium Tuesday morning.
Mr. Kenney’s projections of 500,000 unemployed Albertans paint a more dire picture than numbers presented on March 25 by Royal Bank of Canada Economics.
In a Canada-wide report on the economic fallout from COVID-19, the bank forecast 200,000 lost jobs between Alberta and Saskatchewan – 20 per cent of the overall hit to employment in the country.
Mr. Kenney’s office said in making its unemployment forecast, it used multiple indicators, including Alberta employment insurance filings and business closings as a result of the pandemic. Spokeswoman Christine Myatt said there were no further details available, including how long such a dramatic spike in unemployment could last.
Mr. Kenney’s remarks underscore just how keenly the energy sector awaits federal financial aid to accelerate the clean-up of thousands of old oil and gas wells littered across the province. Such a plan would benefit the province by combining environmental clean-up with job creation.
It would also help alleviate oil and gas companies’ financial struggles by removing the well liabilities from their bottom line, although critics have said companies should remain on the hook for cleaning up their messes.
Mr. Kenney said development of a well clean-up package is “well advanced," and signals from Ottawa indicate it will be released by the end of this week. He expects it to be “orders of magnitude” larger than the $100-million loan his government recently made to the Orphan Well Association.
On Tuesday, Finance Minister Bill Morneau’s office had little to say about Mr. Kenney’s pronouncement.
“We're continuing to work with provinces and stakeholders from the energy sector to ensure that we can provide appropriate credit measures for the industry, especially the small- and medium-size firms in that sector, and support its workers,” Maéva Proteau, press secretary for Mr. Morneau, said Tuesday.
“Also, the Canada emergency wage subsidy and the Canada emergency response benefit will help people and businesses across the country, including in the people in the energy sector.”
Calgary economist Trevor Tombe was not surprised by Mr. Kenney’s unemployment forecast, and reckons it could be even higher.
Mr. Tombe pointed to the virtual evaporation of the retail, accommodation and food sectors, which combined employ around 400,000 people.
“To a large extent, this unemployment rate is a policy choice that the government has made to prevent a health catastrophe in the future,” he said.
According to Statistics Canada, Alberta’s highest unemployment rate in the last four decades was 12.4 per cent, in September, 1984.
TD Economics projected late last month Canada’s unemployment would temporarily soar to an average quarterly level of 11.7 per cent in the second quarter, before dropping to around 6 per cent by year end.
It predicted Alberta’s unemployment rate would hit 9.5 per cent – second only to Newfoundland and Labrador at 12 per cent. It projected the lowest level of unemployment – 5 per cent – in both B.C. and Quebec.
Although Mr. Kenney has repeatedly warned that Alberta’s current economic reality harks back to the Great Depression, Mr. Tombe said that situation was more of a structural problem than the contagion’s current hit to the economy.
“This is a deliberate choice to put economic activity into a medically induced coma in order to heal and get through it,” Mr. Tombe said.
Along with a well clean-up package, Alberta continues to push Ottawa for a credit backstop that would allow financial institutions to keep extending credit to distressed oil and gas companies. Mr. Kenney estimates a liquidity package will need to be between $20-billion and $30-billion.
Canada’s financial system cannot afford “massive and permanent” destruction of value in the Canadian energy sector, he said Tuesday, as the two are so closely intertwined.
“This is not simply Alberta engaging in special pleading. This affects other provinces, especially Newfoundland and Labrador and Saskatchewan,” he said.
Natural Resources Minister Seamus O’Regan is preparing to hold a conference call Thursday with his U.S. and Mexico counterparts in advance of the G20 energy ministers meeting on Friday.
“Canada will participate, and has been actively consulting with provinces, Canadian companies, and workers, ahead of this meeting,” Mr. O’Regan’s communications director Carlene Variyan said in a statement.
North American energy ministers are meeting to work out a game plan for the Group of 20 talks in response to demands from Saudi Arabia and Russia for the United States and Canada to cut production to help prop up oil prices.
The trilateral discussions will take place at the same time that Alberta will be joining Organization of Petroleum Exporting Countries (OPEC) talks on Thursday that are also being held in advance of the G20.
A senior government official, who was not authorized to speak publicly about the discussions, played down any suggestion that Canada would go along with further production cuts.
Alberta crude production has already been curtailed for more than a year, after the former NDP government mandated cuts to try to shrink a crippling Canada-U.S. price differential.
Mr. Kenney’s government continued with curtailment, though it relaxed the program. Mr. Kenney is opposed to more mandated production cuts, but he said last week Alberta will approach the OPEC talks with an open mind.