On the cusp

In this week’s The Seven…

• That’s better — Alberta jobs in September
• Evidence of the cusp —  ATB Cormark Capital Markets’ Fall Energy Survey
• Who’s going to build? If major projects proceed
• Two engines — Better than one
• Canadian exports — Calm before the storm
• Chicken or egg — Pipelines and production
• Interesting Fact: Lethbridge home prices
• Chart of the Week: Alberta leads job growth…with fewer oil and gas jobs?

Early in my career I received this advice: you can’t drive a car forward staring into the rearview mirror (the feedback came after I spent 30 minutes presenting historical data lagged 2-3 months).

Wise words, but let me first take a quick look in that rearview mirror. Today we got jobs data showing Alberta had a strong bounce-back, and continues to outperform other provinces.

Now let’s look forward. Alberta is on the cusp of a new wave of growth, anchored by additional pipeline infrastructure and the upstream investment to fill it. The word cusp is important, as we still don’t have final decisions on the Pacific Link pipeline or the Pathways project. But even in the absence of these projects, we see Alberta’s GDP growth in the mid 2% range over the next couple years.

Real GDP growth close to 4% is not out of the question if these projects proceed, alongside the upstream investment and production required to fill them. We could be looking at unemployment closer to 5% as opposed to nearly 6% in our forecast for 2028.

Skeptics would argue that Canada’s track record at getting projects across the finish line is less than stellar. Fair point, but there is reason to believe it could happen. New survey data from ATB Cormark Capital Markets shows over 90% of industry executives now expect the Pacific Link to proceed.

One final question to ponder and for discussion at the Thanksgiving dinner table: what if both engines fire at the same time? That is, the energy sector gets going while the other sectors—tech, petchem, food manufacturing, aviation to name a few—continue to move higher?

That’s better - Alberta jobs in September

On my long list of things to be thankful for, I just added Alberta’s job numbers this morning.

They were unambiguously positive for September - a 23K improvement amid national declines of 68K as we discussed in detail this morning. 

We never get too worked up about one month—the monthly series are notoriously volatile.  But the trend has Alberta leading in job growth this year by a sizable margin.

Curiously, it has happened without oil and gas (see Chart of the Week below).

Who’s going to build?

What happens if the economy continues to create jobs, but the influx of job seekers slows?   The unemployment rate falls. 

That’s what has happened in recent months, in line with our latest forecast. Put another way, Alberta is now finally creating jobs at a pace that absorbs the job seekers.

If the labour market is already rebalancing, what happens if new projects kick off? We’re going to need workers.

This week, Carol and I embarked on a two-part series “Who is going to build?” amid slower population growth, an aging workforce and existing shortages in the construction trades. Part 1 looks at the demographic squeeze, Part 2 focuses on the need for tradespeople. More to come on this.

Evidence of the ‘cusp’ - ATB Cormark Capital Markets’ Fall Energy Survey

Don’t take it from me; energy execs are getting more optimistic that major energy infrastructure projects will proceed.

ATB Cormark Capital Markets’ newly released Energy Survey shows that 91% of respondents expect a positive final investment decision on the Pacific Link pipeline and the accompanying Pathways carbon capture project. Most expect construction to begin in 2028 or later. The findings come amid renewed activity across Canadian energy, including major pipeline and LNG developments and consolidation in the oil sands, such as Cenovus’s proposed $5.7-billion acquisition of Athabasca Oil.

Attention is turning to growth. Canadian oil and gas producers are planning to ramp up production and capital investment heading into 2027.

Despite budgeting conservatively for WTI crude in the US$65-$75 range, 96% of surveyed producers expect to increase production over the next year, while 90% of energy services respondents anticipate activity levels to increase in 2027. More than half of producers plan to raise exploration and development spending. Growth capital has also risen through ranks and become institutional investors’ top priority, with 41% ranking it first—up from 18% in the spring.

So…are we really on the cusp of a new growth cycle?

We’ll explore that in next Wednesday’s Twenty-Four, following my interview on the results with Tim Monachello, Energy Analyst at ATB Cormark Capital Markets and lead author of the survey.

Two engines - better than one

Economic diversification has long been the goal in Alberta. 

I think of it as an “AND, not OR” proposition. By AND, I mean building off existing strengths in productive resource industries (I called it ‘productive diversification’, and wrote a paper on it).

The last decade has brought growth in a few industries I would put under the ‘diversification’ banner, like food manufacturing, tourism, petrochemicals, high tech and aviation.

The question is, can Alberta walk and chew gum at the same time? There is a case to be made that these industries can continue growing while the province also embarks on a new energy growth cycle. Key will be managing costs and finding qualified workers.

To see the two engines at work, here is one of the charts I presented at the Calgary Economic Outlook event. The dotted line is what happens if we get new pipeline capacity and the investment and production to fill them. The yellow line is our base case projection for non-oil and gas investment.

Not so fast - Canadian exports expected to weaken

We got August trade numbers this week. The monthly numbers are volatile, so I’ll just give you a few themes that stick out to me:

• Pre-tariff front-loading - U.S. exports were up in August, but expect them to cool in the coming months as firms were trying to get ahead of newly imposed tariffs.
• Energy bump - Higher prices are lifting export values, pushing the trade surplus higher.
• Trade diversification is a long journey - The country is working on expanding ports and pipelines, but making serious inroads overseas will take time to materialize. Much of the non-U.S. gains last year were driven by oil (Trans Mountain expansion) to Asia and gold (higher prices) to Europe. New facilities like the recently FID’d LNG Phase 2 will help - but again, it takes time.

A turkey in the coalmine - Rising cost of living

The latest edition of the Calgary Foundation’s annual Quality of Life Report found that 59% of Calgarians have changed their eating habits due to rising costs. This rises to 73% for those making less than $60,000. This is more evidence that the cost of living, especially the cost of food, is weighing on households in Alberta. With Thanksgiving taking place on Monday, there are reports of higher turkey prices.

It’s not just households. Our latest small business pulse shows that rising business costs are top of mind for Alberta businesses. 

Spiking diesel prices are already affecting agricultural operators who rely on the fuel, and it’s only a matter of time before these higher input costs show up in the grocery aisle. 

Chicken and egg - Pipelines and production

Our friends at Studio.Energy, who we’ve partnered with on our report on quantifying the economic impacts of the potential West Coast pipeline, have addressed a classic question in the energy sector in their recent publication: “Is There Enough Oil to Fill the Pipes?”

Supply isn't a constraint; Canada's 159 billion barrels of proven reserves can sustain extraction for over a century. Backed by 57 queued projects and drilling innovations in plays like the Clearwater formation, Canada boasts nearly 4.0 MMb/d of growth potential. To mitigate risk, operators are favouring smaller, modular 40,000 b/d expansions over traditional megaprojects.

Ultimately, while physical resources can easily meet the 1.5 to 2.0 MMb/d required by new pipelines, the defining hurdle is proving project economics are attractive enough to secure the estimated C$100 billion in necessary capital investment.  

Like Studio.Energy, we concur that pipeline final approval is the chicken that needs to come first in the chicken-and-egg dilemma.

Interesting Fact: Lethbridge house prices

Nestled in the coulees (steep-sided, V-shaped valleys) of southern Alberta, I visited the Census Metropolitan Area of Lethbridge this week. It is home to just over 143,000 residents as of 2025. Like in its larger neighbours of Calgary and Edmonton to the north, Lethbridge has seen a strong uptick in home prices over the last few years, but the average resale price in August remained relatively affordable at $440K versus $664K in Calgary, $463K in Edmonton, and the provincial average of $530K.

That said, Lethbridge home prices have been rising faster than the provincial average since 2022. 

One reason is that Lethbridge, like other similarly sized cities, has not seen nearly the same increase in housing supply as Calgary and Edmonton. As we discussed, the boom in Alberta housing starts over the past few years has largely been driven by Calgary/Edmonton, and very much multi-family focused.  

Tighter supply = higher prices.  Basic economics.