In this week’s The Seven…

• Faster in the slow lane -  Our latest Alberta economic outlook
• This time is different - Alberta leads in job growth despite flat oil and gas employment
• Why not $200/bbl? - Explanations for ‘muted’ price reaction to Hormuz crisis
• Let’s wait here - Bank of Canada facing a ‘dilemma’
• The heat is on - U.S. inflation highest in three years
• Interesting Fact - A recession is more than a ‘technical’ definition
• Chart of the Week - Shipments through the Strait of Hormuz

There are a couple of ways to view the Canadian economy right now.

View A - bleak. The Canadian economy is struggling, having slipped into a technical recession (though not an actual one - see this week’s Interesting Fact) and jobs are below December levels. Now that the population has declined, structural problems around weak productivity and low investment are more apparent in the headline GDP data. 

View B - optimistic. The economy is ready for takeoff. We’re in the “ready, set…” position. Canada has what the world wants, and there’s an appetite (in no small part because of President Trump) across Canada to turn promises into shovels.

Both views can be true at the same time. The economy, to use the words of Bank of Canada Governor Tiff Macklem on Wednesday, is “weak.” But there are some signs in the data, notably improving exports in April and the employment rebound in May, that the second quarter will be better.

In Alberta, the economy is moving faster—leading all provinces in jobs added this year. In the energy sector, higher oil prices have lifted rig activity. Progress on LNG and new pipelines could lead to a new growth cycle, though the industry is not cranking up capital spending on growth projects just yet. It remains in ‘wait and see’ mode due to some outstanding items, including execution on the Canada-Alberta MOU. Demographic trends are also stronger, lifted by interprovincial migration.

And yet, it’s not a classic boom à la 2003-06 or 2010-14. We’re forecasting 2.5%ish real GDP growth for Alberta, not the 5%+ average growth during those periods.

So how do we shift from A to B? The economy will need a faster car—we’re just not there yet.

This week’s signature event - ATB’s latest economic outlook

In case you missed it, we released our latest quarterly forecast on Thursday. It’s riveting with cool charts, so please read it. But if you don’t have time to scroll through our 16-page report, here are two takeaways:

• Alberta is expected to lead the country in economic growth this year, supported by energy sector gains and more persistent population growth. We’re forecasting 2.6% GDP growth for Alberta (up from 2.1% pre-oil price spike in December) vs. 0.8% for Canada. The income effect (higher nominal GDP) from higher oil prices is much larger than the real impact (real GDP).

• It’s faster in Alberta, but not quite the energy-boom of the past despite the oil price surge. The economy is held back by trade uncertainty, a ‘wait and see’ approach on major projects (notably pipelines), and cost of living pressures.

So, in summary, Alberta’s economy is like a car moving faster in the slow lane.

This time is different - Employment rising despite fewer oil and gas jobs.

“It feels different this time.” That’s a comment I regularly get when presenting on the economy in Alberta. My response: “That's because it is different.”

Most people acknowledge, especially if they are from other parts of the country (or have contacts there), that the economy is moving faster in Alberta. But it doesn’t feel like the oil booms of the past, characterized by rapid wage and cost escalation, and labour shortages.

Those feelings are supported by data. The unemployment rate has come down, but is still above historic averages at 6.6% (youth unemployment is especially elevated). Investment is improving, but still well below 2014 peaks.

What’s different is that the current expansion is more broad and more moderate than past upswings. Oil production continues to set new records, but at lower levels of investment than in the past. Growth is coming from a more diverse mix of industries, such as food manufacturing, petchem, aviation, tourism and tech.

Here’s a chart that supports this point. Year-to-date, Alberta leads all provinces (by a long shot) on jobs added—and yet oil and gas employment is flat over this period. That’s very unusual. It also suggests upside, as we’d expect the recent uptick in rig activity to translate into more jobs eventually.

More to come on this next week, but here’s a teaser chart (violating my own rule of not using two-axis charts—sorry).

Why is oil not $200? - Let’s count the ways

The International Energy Agency calls the blocking of the Strait of Hormuz—the transportation channel for about a fifth of global crude—the largest supply disruption in the history of the oil market.

And yet, oil prices (both WTI and Brent) are at the time of writing trading less than $US90/bbl—far from the US$150 to US$200 some feared.  
How is this possible? Here are a few explanations:

Pre-war glut - The world entered the crisis with excess supply.  Recall that prior to the war, the concern was too much oil in the market, with forecasts of around $US 60/bbl.

Pipeline workarounds - More oil is being shipped via the East-West pipeline in Saudi Arabia to the Red Sea.

Some oil is still flowing through the Strait - It’s a small shadow of pre-war volumes, but some shipments are flowing via U.S. escorts, sailing dark, and a few country-specific exemptions. See the Chart of the Week.

Inventory draws - China, in particular, has built up massive strategic petroleum reserves and has been drawing on those stocks to compensate for lower Middle East imports. The International Energy Agency (IEA) agreed to release a record 400 million barrels of crude oil from strategic reserves.

Export response - A small portion of the gap is being made up by other countries, like the U.S., which has ramped up its exports in large part by drawing down its own inventories.

A sanguine view - Hopes of a deal and imminent opening of the Strait, in part due to frequent Trump messaging. Today oil prices plunged on reports that a deal could be imminent.    

Demand pullback - There is fuel rationing in parts of Asia. The U.S. Energy Information Administration (EIA) projects a 1.1 million barrel/day pullback in demand this year—the first annual decline since COVID.

Financial is not physical - The price traded in financial markets does not reflect the price actually being paid in Asia for physical barrels, which is much higher.

Despite the various workarounds, this is no time for complacency. Yesterday, S&P Global Insight warned that "the global oil market is nearing its capacity to drain emergency reserves."  It argues that with a limited inventory buffer, consumption will be forced to shrink and that Brent prices will average US$110/bbl this year.

For Alberta, what matters is that we’ve entered into a higher-for-longer period for oil prices. This provides a tailwind for producers, with some early signs that rig activity is increasing.

Answer to the previous trivia question: It’s true: U.S. President Nixon proposed a ban on selling gasoline on Sundays as part of an effort to address the energy crisis that followed the 1973 Arab oil embargo.

Today’s trivia question: As of May 2026, what percentage of national forestry, fishing, mining, quarrying, oil and gas sector employment was in Alberta?