The Twenty-Four
In this week’s The Seven…
- Shake it off - Jobs surprise in June
- Out of the woods? Not even close
- On the grounds - ATB at the Stampede
- Ready, set…Attention turns to action on major projects
- Drill, baby, drill - But where did U.S. clean energy subsidies go?
- Coming to Innisfail - Capturing carbon from the air
- Coming to Calgary - Aircraft maintenance and repair facility
- Interesting Fact: Spending during Stampede
- Chart of the Week: Copper prices spike on tariff threat
Are we there yet? You may hear this question on your summer road trip.
If your kids are asking about the trade war ending soon, I would say it’s a solid “no.”
After some reprieve, it was a busy week on the tariff front. Trump sent "tariff letters" to 22 countries, outlining new tariff rates that will take effect on August 1 if no trade deals are reached. This is a further extension of the original 90-day pause of the "reciprocal tariffs" announced April 2 (“Libertion Day”). One of the letters was sent yesterday to PM Mark Carney, threatening 35% tariffs on Canadian exports, citing fentanyl, trade deficits and supply management. Further, copper tariffs will be a whopping 50% on August 1—sending prices of the commodity soaring this week.
Uncertainty has been the theme of the year. And despite what I just said above, readings of policy uncertainty have actually improved. Further, business and consumer confidence indicators have gained traction in recent months and equity markets (S&P 500 and TSX 60) are well above their pre-Liberation Day peaks. True, the S&P 500 dipped this morning on Trump tariff threats, but the index is tracking fairly flat for the week.
Are we getting desensitized to all this following the April 2nd tariff shock? I would say it’s partly that. I’d also argue that, despite this next wave of threats, there are good reasons to believe there are legal and financial market constraints to broad-based tariff action.
So where are we in the trade war? It seems like a last ditch attempt by Trump and team to extract concessions before landing on a new ‘normal’—in our view, that entails a base level of tariff with some sector-specific increases (steel and aluminum, autos, pharmaceuticals, copper, etc.).
In Alberta, summer festivities are in full swing and, outside the trade situation, there is cautious optimism that major energy infrastructure projects will be built. Today’s strong jobs report may put more bounce in the Stampede step. But Alberta is no stranger to adversity, and we watch with caution the trade situation rapidly unfolding before our eyes.
Shake it off - More jobs in June
“Well, that’s interesting” was my first reaction to the jobs report released this morning.
Consensus, according to Bloomberg, was that the unemployment rate in Canada would inch up again and jobs would hold flat. Our view was that it would be another underwhelming report.
Instead, Canada added a sturdy 83,000 jobs and the unemployment rate edged lower to 6.9%.
Alberta led the provinces with a massive 30,000 gain in June—its largest increase since December and coming off a lull to start the year. It was broad-based. A number of industries contributed to the lift, including resource extraction (namely oil and gas), manufacturing, wholesale and retail trade, transportation, finance and real estate, and healthcare.
Looking deeper, the details of the Alberta report were strong—full-time jobs (+51.3K) offset part-time losses, and almost all the new jobs were in the private sector (+26.3K).
Alberta now finds itself with a slightly lower unemployment rate than the rest of Canada at 6.8%, and nation-leading employment growth over the past 12 months (3.3% vs. 1.6% nationally).
Rapid labour force entry has been the challenge in Alberta—finding enough jobs for the people coming to the province. Last month, Alberta’s labour market overcame the challenge, with jobs outmatching labour force growth.
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Are we out of the woods?
No. First, this is just one report. The jobs data are notoriously volatile. Further, the industry most exposed to tariffs—manufacturing—has shed workers since the beginning of the year.
Second, we are still in the cross hairs of the trade war, with Trump turning up the heat this week. While we do see Canada avoiding the worst case 35% blanket tariff scenario, we also believe that ‘on and off again’ tariff uncertainty will remain a drag on business investment and hiring.
But we also should acknowledge that June’s employment report far exceeded our expectations, and for now, our base case forecast released last month looks a tad pessimistic.
Our general Alberta outperformance thesis still holds—the data are lining up with our view that Alberta will fare relatively well given a lighter direct tariff hit, and some pretty big push forces coming from energy production and home construction.
It’s too early to go back to the forecast drawing board—risks are still high and we now have a new tariff headwind coming full steam ahead. Treat our June forecast, with the low and high cases, as a reasonable planning scenario (that’s why we run scenarios!).
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Tough spot for Bank of Canada
In isolation, this jobs report puts any talk of a July rate cut to rest. But, to repeat, it’s only one data point and the Bank will need to factor in the latest trade headwinds. Based on this report, we think the Bank will hold this month.
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On the grounds - ATB reporting from the Stampede
ATB Capital Markets hosted a Stampede client event on July 8, attended by many in the energy sector.
One of the themes was cautious optimism that energy infrastructure will be built, though the industry is still in ‘wait and see’ mode.
Waqar Syed from ATB Capital Markets provided this note in his report:
“Cautious Optimism in the Long-term Competitiveness of Canadian Energy: Many participants at the ATB event believed that the comments coming from the Canadian federal government were supportive of Canadian energy and if implemented could improve the long-term competitiveness of Canadian energy. However, participants also stated that they “will believe it when they see it”, and that the oil and gas industry was not going to invest billions of dollars in infrastructure development until they saw an actual change in the legal and policy framework. Some participants also mentioned that they were hearing about US private equity and US strategic buyers exploring deals in Canada. We are not surprised as the Canadian WCSB is gifted with sizeable high-quality resource, and if provided with supportive policy and legal framework, Canadian energy could materially grow to meet global hunger for low cost energy.”
Ready, set…Framework in place, but Canada waits for action on major projects
With the Building Canada Act, Bill C-5, receiving Royal Assent, we now wait.
The legislation promises to fast track projects in the national interest. There’s lots of talk about what those projects could be, but little indication of what they actually will be. Federal sources indicate more consultation, including with Indigenous communities, is required before finalizing the list.
Energy corridors seem to be getting momentum, with the Prime Minister saying it’s “very, very likely” a pipeline project will be added to the list. Shortly after making the comment, Ontario and Alberta signed a MOU supporting energy and critical minerals development in Canada, including new pipelines.
This is worth watching closely. If new energy infrastructure projects proceed, it would be upside to our latest Alberta and Canadian forecast.
U.S. drill, baby, drill - But what about the clean energy subsidies?
The Trump Administration, via the "One Big Beautiful Bill Act" and executive orders, has drastically cut clean energy subsidies from the Inflation Reduction Act (IRA) while prioritizing oil and gas development. Key changes to Biden’s IRA include: accelerated phase-out of tax credits for residential solar and utility-scale wind/solar; elimination of electric vehicle (EV) tax credits after September 2025; and termination of energy efficiency programs and the Greenhouse Gas Reduction Fund.
Not everything was cancelled, however. For example, the clean fuel and advanced manufacturing production credit remains in place (with some modifications), along with nuclear power and carbon capture credits (with foreign restrictions).
There is legal uncertainty over how funds approved under the IRA will be treated, likely leading to litigation. But the wheels are in motion: the U.S. is doubling down on “drill, baby, drill” and backing off on clean energy.
Coming to Innisfail - Capturing carbon from the air
Alberta is a leader in carbon capture and storage, taking industrial emissions and storing them underground.
But what about capturing emissions directly from the air?
Deep Sky's Alpha facility in Innisfail, Alberta, has completed construction and is entering commissioning, aiming to be fully operational by August 2025.
This facility is the world's first to test multiple Direct Air Capture (DAC) technologies simultaneously under identical conditions.
Deep Sky Alpha will capture up to 30,000 tons of CO2 annually, converting it to liquid for permanent underground storage, powered entirely by solar energy.
Coming to Calgary - Aircraft maintenance and repair facility
One of the growth areas we’ve highlighted in our latest outlook is aerospace.
Announced late June, the Lufthansa Technik Canada facility in Calgary will be a new engine maintenance and repair facility representing a $120 million investment. It is being developed in cooperation with Calgary Airports and is scheduled to be operational by 2027.
The facility will be approximately 150,000 square feet (about 14,000 square metres) and is designed to address the increasing demand for mid-sized aircraft engine maintenance.
Have a new major project we should highlight? Send us a note at thetwentyfourseven@atb.com.
Interesting Fact: Spending during Stampede
Using ATB Financial consumer Mastercard data, we find that daily spending by Calgary cardholders on dining and entertainment rose by about 22% during the 2024 Stampede compared to the period before and after the event.
Chart of the Week: Copper prices spike on tariff threat
Copper prices are often used as a barometer of the health of the economy. Not this time. The recent jump reflects Trump’s latest tariff promise to increase copper tariffs to 50%. Copper just had the largest single day increase on record post announcement, and now sits near record highs as shown in our Chart of the Week.
A few stats on copper in Canada: In 2023, Canada mined about 508,000 tonnes of copper, with the vast majority (over 90%) coming from B.C. and Ontario. Canada is the 12th largest producer at just over 2% of global production in 2023 (Chile was the largest at 23% of the global total).
Answer to the previous trivia question: The homeownership rate (i.e., the proportion of households who own their home) in Canada in 2021 (latest data available) was 66.5%.
Today’s trivia question: Copper is seen as a leading indicator of economic activity and a barometer of global economic health. For this reason, copper is sometimes referred to as what?
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