In this week’s ATB Economics Weekly Wrap…

• Alberta adds jobs in June
• Businesses in Alberta more optimistic now than earlier in the year
• Household debt ratios - a provincial perspective
• Population growth à la 1981 and 7.1 million Albertans by 2051
• Bank of Canada makes its rate decision next week
• Chart of Week: International airport visitors during Stampede

More jobs in June - Alberta’s labour market ended the first half of the year with a 10,600 employment gain in June compared to May. The improvement was concentrated in full-time work (9,800) and comes after two flat readings in April and May.

It’s important to not overinterpret monthly changes given the volatility of the series and the large standard error around the estimates (11,000 for employment).

Looking at a longer period, employment rose 3.4% (or 80,200) in the first half of the year compared to the same period last year, outpacing the national increase of 2.4% and ahead of all provinces except New Brunswick (+3.6%). Gains in the first half have been led by service-producing industries, namely professional and scientific services, and transportation and warehousing.

Alberta employment is now 6.7% higher than pre-COVID levels (February 2020) compared to 4.9% nationally.

In June, employment in Alberta grew at roughly the same rate as the labour force, keeping the provincial unemployment rate steady at 5.7%, but narrowing the gap with the national rate of 5.4%.

The influx of migrants (see below) is helping employers fill jobs, but job vacancies remain elevated (94,300 as of April 2023, down from the peak of 107,900 in April 2022) and many businesses say they still intend to hire. Further, the industry with the highest vacancy rate—accommodation and food services—remains well below pre-COVID employment levels, providing scope for further gains.

Bottom line: Alberta had its first meaningful improvement in employment in three months following the rapid pace set in the first quarter. Our June forecast assumes that jobs would level out in the second half, as higher interest rates and slowing global conditions weigh. But given the solid year-to-date results, we are leaning towards upgrading our current forecast of 2.8% for annual employment growth in 2023. We will wait for another month of data before making a call in our next quarterly forecast.

Canadian jobs higher, but unemployment rises again - Canadian employment surprised to the upside, posting a 60K gain in June. This is triple the Bloomberg consensus forecast of 20K. Despite the strong reading, there are some signs that the labour market is cooling in this report. First, the unemployment rate posted its second straight increase, up by 0.2 points to 5.4%, after holding at 5% from December 2022 to April 2023. While still low by historical standards, this is the highest rate since February 2022. Second, average hourly earnings growth among permanent employees (followed closely by the Bank of Canada) eased to 3.9% year over year, the slowest reading since April 2022.

Bottom line: Canada’s labour market remains resilient, with employment bouncing back in June. That said, we have now seen two months of rising unemployment and a slowdown in wage growth. This, combined with a material pullback in national job vacancies and weaker hiring intentions in the Bank of Canada’s Business Outlook Survey, suggests that rising interest rates are finally taking a toll on Canada’s resilient labour market.

Population growth à la the early 80s - Last week we reported on Alberta’s first quarter population growth. Given the size of the numbers, it warrants more attention here. 

Alberta’s population was 4.7 million as of April 1, a stunning 4.5% increase from the same time last year—beating the national growth rate of 3.1% and second only to Prince Edward Island’s increase. That’s 200,900 new residents or the equivalent of adding two Red Deers. The province has not seen this size of year-over-year percentage growth in over four decades (since 1981 to be precise).

The growth came from all angles: international migration (62%), interprovincial migration (28%), and natural increase (10%). But the differentiator for Alberta is interprovincial migration because it is a jobs and, more recently, affordability story.

Recall that interprovincial migration nets out to zero for Canada, so Alberta’s gain is the rest of Canada’s loss. Not surprisingly, Alberta’s year-over-year population growth outpaced the national average by 1.4 percentage points.

As we discussed in our recent report on Alberta’s population, interprovincial migration flows are sensitive to the economy. Job gains have undoubtedly contributed to the positive interprovincial migration figures. But with labour markets tight elsewhere, it seems that affordability has taken on an outsized role. Relatively lower housing prices and rents in Alberta have lured folks, particularly from BC and Ontario with the two provinces accounting for nearly three-quarters of the net interprovincial flow into the province over the last four quarters of data. 

Bottom Line: We were expecting solid population growth in early 2023, just not this strong. Our 2023 forecast (July to July) is admittedly too low at 3.2%. It is now likely to exceed 4%. Population growth means higher pressure on housing, more job vacancies will be filled, and increased support for consumer spending (cushioning the impacts of higher interest rates).

Alberta could surpass 7 million people in 30 years - New long-term population projections from Alberta Treasury Board and Finance indicate that Alberta’s population could reach 7.1 million by 2051 under the medium-growth scenario.

Bottom line: While the numbers have been updated, the overall trends we described in our recent report on Alberta’s population hold: Alberta’s population will get older (but wiser!), more urbanized, and more diverse. More than half the gains will come from international migration. Alberta’s younger population will contribute to steady natural increases (birth less deaths), while interprovincial migration will also be a source of growth.

Alberta businesses more optimistic now than earlier in the year - The Business Council of Alberta’s June survey of Alberta businesses showed an uptick in a number of forward-looking indicators. Compared to the last survey in February, a greater share of Alberta businesses are expecting sales, investment, and employment to improve over the next 12 months. On the other hand, a higher share of businesses say they are experiencing financing challenges.  Labour shortages remain an issue, though not as much as in February.

Another survey put out by the Canadian Federation of Independent Business showed a similar trend relative to February for small businesses. Conditions are expected to be stronger over the next 3-months and 12-months compared to expectations in February. The index wavered slightly from May’s level, but not nearly as much as the national index, which fell into contraction mode for the 3-month outlook. 

Bottom line: These surveys reinforce our view that Alberta’s economy will outperform other parts of Canada in an environment of higher interest rates and cooling global demand. 

Household debt ratios - a provincial perspective - On Tuesday, Statistics Canada released updated information on household balance sheets, including provincial breakdowns. We focus here on one of the most commonly-reported metrics: household debt to disposable income.  

Overall levels - As of the first quarter of 2023, Alberta household debt stood at 187.1% of disposable income, compared to the national average of 198.5%. BC (230.3%) and Ontario (217.8%) had the highest ratio, and New Brunswick (134.5%) and Nova Scotia (142.1%) the lowest.

Changes over time - In the past, Alberta has had a higher household debt to disposable income ratio than the national average. That changed in early 2022. With a relatively flat housing market, Albertans have not added as much to mortgage debt as in other provinces. As a result, Alberta’s debt to disposable income ratio remains below its 2016 peak (despite increasing in the first quarter), while Canada’s has continued to trend higher. 

Role of demographics - Debt levels are influenced by age structure, with younger Canadians holding more debt than their older counterparts. Unfortunately we don’t have an Alberta breakdown, but the national numbers show large variations: for 35-44 year-old households, the debt to income ratio was 276% in the first quarter compared to 71% for 65+ households. Overall, Alberta’s young demographics (with a smaller share of 65+ and higher share of younger prime working age households) tends to put upward pressure on the province’s average debt levels. 

Type of debt held - Alberta has a lower share of overall debt tied to mortgages, at 70.2% compared to 73.5% nationally.  

Other metrics - There are other household balance sheet metrics. Net worth (assets less liabilities) per household in Alberta increased in the first quarter, but remains below the peak reached last year. Alberta’s net worth per household is higher than the national average.

Bottom Line: Provincial variations are often lost in the national discussion of household debt. Household debt to disposable income is one of many measures of indebtedness. Alberta has moved below the national average on this metric since 2022, though is third among provinces after BC and Ontario. Demographics should be considered when making comparisons, along with other measures of household balance sheets. 

Albertans, like other Canadians, face rising debt servicing costs. Some are feeling the pressure now, while others will face higher payments when their loans mature and are renewed. For this reason, we expect that Alberta consumers will restrain more discretionary spending in the second half of the year, with the province’s booming population providing an offset to overall spending.

Bank of Canada makes its next rate decision July 12 - We will find out next week if the Bank tightens again or sits on the sidelines. June’s rate increase came on the heels of stronger-than-expected April inflation and first quarter economic growth. The Bank has stressed data dependency for further decisions. So what new information does the Bank have at its disposal since the last announcement?

• The national inflation rate fell to 3.4% in May, down a full percentage point from April and the lowest in two years. While this is good news, the slowdown was widely anticipated. The Bank of Canada said that inflation would fall to around 3% over the summer. While the Bank’s preferred core inflation readings are trending lower, they have been much stickier. 
• GDP was flat in April, held back by the federal public service strike, but the advance estimate shows a 0.4% uptick for May. While year-over-year readings are slowing, the Canadian economy continues to show resilience to higher rates.
• The Bank of Canada’s surveys showed that business sentiment has weakened, and inflation expectations are falling. However, consumers and businesses expect that price increases will be higher than normal and well above the 2% target.
• Job growth was stronger than expected in June following a pullback in May, though the unemployment rate inched higher and annual wage growth slowed.  

Bottom Line: As of Thursday, financial markets were pricing another rate increase. Our leaning is that the Bank will likely make one more rate increase next week. The Bank has stressed its resolve to get in front of inflation pressures, suggesting it may be inclined to act now instead of waiting to see more evidence that past hikes have had the desired effect.

The Calgary Stampede kicks off - The Calgary Stampede, the city’s main event, officially kicks off today with the Stampede Parade. From chuckwagon races to live performances by Pitbull, Alabama, Shaquille O'Neal, Tegan and Sara, and many others, the event promises to draw a large crowd.

Will the Stampede return to pre-pandemic levels of attendance? It’s hard to say in part because of unpredictable weather—2016 was held back by the rain, for example. 

Last year came close: 1.2 million entered the gates, just shy of 1.3 million in 2019. But it was the rebound that was most impressive, as attendance more than doubled from 2021’s scaled back event due to the pandemic. (There was no Stampede at all in 2020 because of COVID.) 

The Stampede will provide a boost to the hotel sector, which is finding its feet after a tumultuous three years. In July 2022, the hotel occupancy rate averaged 83.2% in Calgary, up 30.8 percentage points from the same month in 2021, and exceeding the next highest month that year (August) by nearly 9 points. 

At Calgary’s International Airport, thousands are arriving for the festivities. In this week’s chart of the week (see below), we show daily international overnight visits to the airport in the days leading up to and during Stampede. While airport visits normally rise during the summer months, there is a noticeable uptick around Stampede. International visits especially matter to the economy, as these are new dollars that would likely not otherwise have been spent.

Daily trivia

Answer to the previous trivia question: The first Calgary Stampede was held in 1912.

Today’s trivia question: What year did the Calgary Stampede set an attendance record?