The rehab program has only just begun
While it’s great economic news that the Alberta economy is reopening faster than many expected, we need to be realistic about the length and difficulty of the rehab process to come.
By ATB Economics 24 June 2020 2 min read
It can be useful to compare Alberta’s economy to an elite athlete.
When we are on our game, our economy is a powerhouse that produces jobs, GDP and opportunities on par with the wealthiest economies in the world. But our exciting style of play makes us prone to injury in the form of downturns in the oil and gas sector.
When the pandemic came along, athletes of all skill levels sustained serious injuries. Think of the lockdown as a really bad hit to the knee that sends a hockey player to the hospital and the reopening of the economy as successful surgery a few months later.
Barring a second wave of the virus that forces another round of widespread lockdowns, the injury and the hospital stay are behind us here in Alberta. But the rehab period has only just begun and it will take time and effort before we will be back on the ice topping the scoring list again.
And, because the knee injury aggravated our pre-existing oil and gas problem, we have to recover from both injuries before we will be back in championship form.
Given this, what can we expect in the months ahead?
Even though jobs are coming back, the unemployment rate will likely remain above where it was before the pandemic well into 2021.
Demand for oil is rising, but the path back to pre-COVID consumption is likely to be long and bumpy and the possibility of another supply glut hangs over the industry like a dark cloud.
Trade flows are picking up, but protectionism, chilly relations between the world’s two largest economies and slow growth in the wake of the pandemic (which is still getting worse in many parts of the world) are like sand in the international economy’s gas tank.
Consumers, businesses and investors have money to spend, but their confidence has been shaken and many households either have been, or will be, strained financially due to the pandemic, the downturn in the oil patch, and/or the recession in general.
Ongoing travel restrictions, damaged supply chains, large government deficits, increased operating costs and the need to adapt to new behaviours will also affect the rehabilitation process.
So while it’s great economic news that we are reopening faster than many expected (every extra day an economy is closed makes the injury worse, the surgery trickier and subsequent rehab harder), we need to be realistic about the length and difficulty of the rehab process to come. We will recover, but it won’t be easy.