In this week’s The Seven… 

• Writing the script in 2026 - It’s Canada’s turn
• Reality bites - Job market still impacted by trade uncertainty
• Beyond our borders - Why Venezuela matters 
• How’s life? It’s complicated
• Interesting Fact: The Donroe Doctrine
• Chart of the Week: Canadian oil - U.S. Gulf Coast comes into sharper focus

“Live your life with arms wide open

Today is where your book begins

The rest is still unwritten”

“Unwritten” by Natasha Bedingfield

So much for easing into the New Year! 2026 started with the U.S. attack on Venezuela and the capture of President Maduro. Last year it was Trump’s tariffs and 51st state threats.

Why does every year need to start with something geopolitically big? 

“Tariff” was President Trump’s favourite word in 2025, and even brought back to fame the classroom scene from Ferris Bueller’s Day Off.

In 2026, tariffs may soon be replaced by two words: the Donroe Doctrine, a strategy for the U.S. to gain more influence in the Western Hemisphere (see our Interesting Fact).

At this point, there are more questions than answers. Who will “run” Venezuela when the dust settles? How will China and Russia respond to U.S. interventions in South America?  

Turning to the U.S. economy, affordability remains a pressing issue, with inflation ‘stuck’ at 3% and employment growth slowing to a crawl (only 50K jobs added last month - the slowest since COVID). But overall, U.S. economic growth continues to motor on better than expected, thanks to the AI boom and expectations of more interest rate cuts. The key question this year is whether the AI boom has legs and whether investment in data infrastructure translates into much promised productivity gains. The state of the economy will be key to Trump’s fortunes in the November mid-terms. The U.S. administration is hoping some of their tax cuts will do the trick.

Despite the news flurry this week, our fundamental view has not changed since our December forecast.

Canada should see another year of modest growth, aided by lower interest rates, easing inflation, and a push to build and export more overseas. Acting as a headwind is stalling population growth, and ongoing trade and geopolitical tensions. We have Canada growing 1.6% this year. 

Alberta should once again fare better than average, lifted by new market access (both natural gas and oil), still-rising population, and recent improvements in the labour market. We expect 2.1% growth this year.

Turning to more cheery news, resiliency has quietly replaced recession as the talking point. Economists (including ourselves) may not like to admit it, but we were a tad too pessimistic this time last year. Economic indicators have generally come in stronger than expected. In a frantic search for excuses, let’s chalk up the pleasant surprise to a lower-than-feared-tariff hit (thanks to CUSMA exemptions).

But we’re not out of the woods. Let’s count the reasons: CUSMA is up for renewal this year (in July presumably) and Trump doesn’t seem like he’s in a rush; we don’t know who will run Venezuela; the war in Ukraine continues to rage; and tariffs are still crippling key industries like steel and lumber, etc.

Circling back to Natasha Bedingfield. I agree with her - the rest is still unwritten for Canada. Last year was about the ‘wake up’ call and promises to get things done in Canada. This is the year of execution. We look more inward this year to see what happens inside our borders.

If only….we could get that trade deal

Employers would love to get some certainty on the trade front. Trade anxiety is holding back hiring, with industries most exposed to the U.S. taking a step back last year.  

Today’s jobs report, which we covered in detail this morning, shows that we’re not out of the woods as unemployment ticked higher despite more resiliency in Q4 than we were expecting.  

Speaking of resiliency, check out Alberta’s Q4 job gain! Strongest on record outside of COVID despite a tough economic climate.

Bottom line: We’re still comfortable with our December forecast, which already assumed the rapid gains during the Sept-Nov period would not continue. Employment growth of 2.8% is expected (boosted by the nice hand-off from late 2025) and an unemployment rate of 6.5%.

What happens in Venezuela, does not stay in Venezuela

Venezuela produces less than 1 million barrels per day (bpd), or about 1% of global crude oil supply. That amount has been in long-term decline ever since President Hugo Chavez’s regime (production peaked at over 3 million bpd in the late 1990s).

Canada, in contrast, is now producing about 5 million bpd - up from 2 million bpd at the turn of the century.

If Canada has the upper hand on oil production, why should we care about the recent events in Venezuela? Two reasons:

1. Large reserves. There is potential to produce more oil in Venezuela – much more. Indeed, Venezuela has the most proven reserves of oil, followed by Saudi Arabia and Canada.

2. Similar oil ‘quality’. It’s not just the amount of oil. It turns out Venezuela's heavy oil is similar to that produced by the Canadian oil sands. This means U.S. Gulf Coast refineries equipped to process heavy barrels could take in more Venezuelan crude at the expense of Canadian crude.

As discussed yesterday, there has already been some downward pressure on heavy oil prices. A scenario where Venezuela ramps up production to 2-3 million bpd, as unlikely as it seems (it would require billions of dollars of investment), could weigh on Canadian oil prices. The bottom line is that Canada needs to further diversify its markets through new export infrastructure to deal with such geopolitical risks.

What if? We didn’t build all those homes last year

In ATB Financial’s December Real Estate Outlook, the word we used for 2026 was “rebalance."

We see more balanced conditions in the multifamily real estate market following the price and rent run-up of 2021-2023, and the building boom of 2024-2025.

That means lower housing starts (but still above historic norms), cooling demand as population growth slows further, and flat to low price increases.

The 2025 Rental Market Report from CMHC, released last month, shows that rental inflation has eased – a combination of slowing migration and new supply. More recent data on posted rents shows an outright decline.

More units, steady vacancies in Calgary - Despite the flurry of new rental supply hitting the market, it may come as a surprise that rental vacancy rates held steady last year in Calgary according to the CMHC (see chart), though there was an uptick in the vacancy rate in Edmonton.  

This begs the question - what if Alberta did not see a surge in purpose-built rentals?

The answer would be a much tighter market, and higher rents - all at a time of ongoing affordability challenges (still the top issue in Canada, and we suspect in Alberta as well).

So raise your glass to homebuilders, who added much-needed supply last year and brought some balance to the market.

How’s Life? It’s Complicated

Are you into New Year’s resolutions? I’m not, but this time of the year I like to take a step back and reevaluate.

To help us assess how Canada is faring relative to the U.S, it’s useful to look at a broad set of indicators - not just the classic GDP per capita so many economists use (we admit, there is more to life than GDP per capita).

When you do that, Canada comes out ahead of the U.S. on measures related to health and safety in the OECD’s “How’s Life?” database, according to analysis by Alicia Planincic at the Business Council of Alberta.

But the nagging issue in the analysis is an economic one. Canada trails the U.S. on key metrics related to GDP per capita like wealth and income.

The good news? This year, we think that Canada will actually start to see some modest improvements in a few of the classic problem areas - GDP per capita and productivity. And there is potential for even more if projects are indeed fast-tracked.

Interesting Fact: The Donroe Doctrine

Following the capture of President Maduro, President Trump invoked the Donroe Doctrine. The goal, it seems, is to assert American primacy in the Western Hemisphere through a mix of military pressure, economic coercion, and selective alliance building.

The Donroe Doctrine is the 2026 rebranding of the Monroe Doctrine, articulated in 1823 by then President James Monroe to prevent European powers from interfering in the affairs of the Western Hemisphere. The key point in the Monroe Doctrine is the one on ‘non-intervention’, which says: “any attempt by a European power to oppress or control any independent nation in the Western hemisphere would be considered a hostile act.”

Chart of the Week: Where does Canadian oil flow in the U.S.?

When it comes to the impact of the recent events in Venezuela on the Canadian oil industry, the focus has been on the U.S. Gulf Coast. That’s because Canada’s heavy oil barrels could compete more with Venezuela's heavy oil in that market if there is a jump in Venezuela's production.

So how much Canadian oil is sent to that market? About 10% of U.S.-bound exports of Canadian crude are sent to PADD 3 on the Gulf Coast - the location of the largest refinery center in the U.S. Keystone XL, cancelled by President Obama and then again by President Biden, would have brought more Canadian crude to PADD 3.

Less concerning is the U.S. Midwest (PADD 2), where Canada has a location and pipeline advantage over Venezuela. Nearly two-thirds of Canadian oil (primarily from the oil sands) exported to the U.S. ends up at Midwest refineries. With TMX now complete, the West Coast (PADD 5) has increased its share from 8% in 2023 to about 10% this year.

Answer to the previous trivia question: In the U.S. oil market, PADD is an acronym for Petroleum Administration for Defense District. The five PADDs (East Coast, Midwest, Gulf Coast, Rocky Mountains, West Coast) were originally created for wartime rationing.

Today’s trivia question: What was the annual unemployment rate in Canada last year?