In this week’s The Seven… 

• Trade war - Better, but still not great
• Energy superpower promises
• Location matters - The relative resiliency of affordable markets 
• They’re multiplying - Alberta housing starts
• 5 million Albertans - How did it happen?
• There’s more to life than GDP per capita, but it still matters
• Canada’s unicorn problem
• Interesting Fact: Mental health and productivity
• Chart of the Week: Will Alberta’s population ever catch B.C.’s?

Are we out of the trade war woods?

Not even close, but some light peered through the trees this week. Markets rallied on the 90-day truce between China and the U.S., following a deal with the U.K. last week. The S&P 500 has recovered all its post-April 2 ‘Liberation Day’ losses, and oil prices bounced back above US$60/bbl.

Combine this with the Oilers advancing to round 3, and let’s call it a good week.

But let’s not get ahead of ourselves. This is a 90-day pause, not a reversal. Further, effective U.S. tariff rates are still 17.8% according to Yale’s Budget Lab, the highest since 1934. Uncertainty persists, and will continue to hold back investment. With the latest data on sentiment and jobs not overly reassuring, we're not jumping to upgrade our Canadian forecast just yet.

A new cabinet with ‘energy superpower’ promises

This week we got a new federal cabinet. Highly relevant to Alberta, the Minister of Energy and Natural Resources Canada is Tim Hodgson, formerly on the Board of MEG Energy and CEO of Goldman Sachs Canada. That oil and gas experience is welcome news. The energy industry has asked the Carney Government to streamline regulations and fast-track projects to deliver on “energy superpower” promises, and awaits the next move.

Location, location, location - More affordable locations see largest price gains

While I’m a big picture guy, housing is not an area to make sweeping generalizations. Canada does not have one housing market, it has several regional markets. And they’re behaving differently.

With the April data in hand, we continue to observe faster price appreciation in less expensive markets (see below).

This trend is playing out in Alberta. Edmonton’s benchmark price held steady last month, but was 11% higher than the same time last year. In contrast, Calgary’s benchmark price fell for the fourth straight month and was up only 0.7% over last year. While both markets have seen sales soften, the housing market is tighter in Edmonton based on the sales-to-new-listings ratio.

Outside the major centres, prices have picked up steam, particularly in Lethbridge (+12.7% y/y), Grande Prairie (13.1%) and Medicine Hat (21.6%).

In short, other markets have caught Calgary’s 2022-2024 real estate fever, which is consistent with our chasing affordability thesis—that is, people seeking more affordable housing.

What do Canada’s housing markets have in common? They all seem to be inflicted with the trade war uncertainty, as buyers remain cautious given unclear job and income prospects. Resales are down across most major Canadian markets vs. March and compared to last year.

They're multiplying - Home starts hit new heights

Just when we thought they couldn’t go any higher.

Housing starts in Alberta hit a new record in April. At least we think it’s a record—we have comparable monthly data back to the 1990s. There was a building boom in the 1970s, but we suspect that last month was even higher than back then.

April starts exceeded 63,300 (seasonally adjusted annual rate), representing 23% of the national total. Calgary led last month's gain, with a jump in multi-family units.

While the trade war is leading to a broader economic slowdown, homebuilding remains an area of strength in Alberta. The industry continues to play catch up following a period of record migration.

We were too conservative in our housing starts forecast at 40K for 2025 in March, though to be fair that’s when we were bracing for potential 25% U.S. tariffs and counter-tariffs. We nudged it up last month to 45K, and are now looking for 48K for the year.

There’s more to life than GDP per capita

We agree. The Business Council of Alberta (BCA) published a report showing that Canada does better when looking at broader measures of well-being using the OECD’s “How’s Life?” database. The good news is that Canada fares better than the U.S. on many social and health indicators.

The bad news, as BCA points out, is that Canada has fallen behind on indicators that are linked to Canada’s weak GDP per capita. In particular, Canada has recorded much smaller gains in average wealth and income than the U.S. People care a lot more about their wages than a country’s GDP per capita, but research shows the two move together—it’s difficult to sustain the former without the latter.

So while it’s not the only thing that matters, we should still take Canada’s languishing GDP per capita seriously. This brings us to the next challenge.

Treating the investment problem

Two weeks ago I argued that lower levels of business investment is the main culprit in Canada’s GDP per capita struggles since 2014, and a reversal of that trend will need to drive the next leg of growth in Canada.

What should be done? A timely paper from the Public Policy Forum notes that Canada has the second slowest permitting process for general construction permits  in the OECD and has gone from 4th to 23rd on the World Bank’s ease-of-doing-business rankings. According to the study, getting back on track requires four ingredients: 1) co-ordinated financing (better align public/private); 2) efficient and effective regulations that speed up approvals; 3) building critical infrastructure that enables private investment; and 4) Indigenous economic participation.

The unicorn problem

One of the pieces to the productivity puzzle in Canada could be a lack of scaling of small firms into larger ones. The higher concentration of small firms in Canada was referenced in the Bank of Canada’s break the glass speech.

A new study tackles the so-called ‘unicorn problem’—Canada’s poor track record in growing companies into unicorns (private companies valued at $1 billion or more) and exiting through an IPO or merger or acquisition. The study’s author, Charles Plante, points to the following challenges: “I think we need to look at three potential factors that is stalling so many of our Unicorns. Those are markets too small for continued growth, weak product/market fit, and low sales efficiency. These all are a function of marketing and sales and are all areas of challenge for Canada, with little government understanding or investment to address.”

Interesting Fact: The link between mental health and economic productivity

May is Mental Health Awareness Month in Canada. We know how important mental health is to an individual and family’s well being. What’s less discussed is how mental health impacts the broader economy.

The World Health Organization pegs the cost to the global economy at $US 1 trillion annually in lost productivity, with 12 billion working days lost, due to anxiety and depression alone. According to a breakthrough study published in The Lancet, increased investment in effective treatment for depression and anxiety orders could yield economic benefits of 2-3 dollars per dollar spent.

A more recent published paper, based on a critical review of 38 studies, points to “clear evidence that poor mental health (mostly measured as depression and/or anxiety) was associated with lost productivity (i.e., absenteeism and presenteeism).”

Chart of the Week: Alberta could surpass B.C.’s population by mid-2040s

Alberta has the third largest economy in Canada, trailing only Ontario and Quebec.

Could it soon have the third largest population?

Potentially, but it will take some time to get there.

Alberta currently has 730,000 fewer people than B.C., but the gap has been closing in recent quarters. With a younger population, Alberta still is expected to grow through natural increase (births minus deaths). In B.C., deaths now exceed births. Interprovincial gains are also expected to be larger in Alberta.

Statistics Canada runs various population scenarios, ranging from low to high growth. In 4 of the 10 scenarios, Alberta’s population exceeds B.C.’s by the end of the projection horizon in 2049 as shown in the chart of the week.* The earliest this happens is in 2042 in the sixth medium-growth scenario.

*Alberta surpasses B.C.’s population in the low-growth scenario in 2049, the M2 medium -growth scenario in 2043, the M3 medium-growth scenario in 2045, and the M6 medium-growth scenario in 2042.

Answer to the previous trivia question: The Ottawa-based e-commerce platform Shopify was founded in 2006.

Today’s trivia question: When did B.C. become a province?