Dear Owl readers: This is the last Owl of 2022. We will be back on Friday, January 6, 2023. HAPPY HOLIDAYS!

I don’t go to the gym as often as I should (i.e., it’s been years), but I know that “delayed onset muscle soreness” often occurs after a workout.

If we think of the interest rate increases that have taken place in 2022 as the workout, we are going to experience some significant economic muscle soreness in 2023.

The overall effect of the higher cost of borrowing will be slower economic growth, if not outright recession in some places.

There are good reasons to think that the pain will be relatively mild and short-lived, but there is no doubt that it will be real. And, if not everything goes as planned, “mild and short” could turn into “severe and prolonged.”

Alberta’s economy will be shielded from the economic drag, but not entirely, by our oil and gas sector and strong economic base.

With the above in mind, the top five economic stories to watch in 2023 are:

Sticky is tricky: Red hot inflation was a huge story in 2022 and will continue to be a factor in 2023. Will higher interest rates bring inflation rates down as hoped? Or will the war in Ukraine, supply chain disruptions and wage-price spirals keep inflation sticky?

Location, location, location: Housing markets in Canada (which vary greatly from place to place) have started to cool due to higher interest rates. It remains to be seen how much of a bite higher borrowing costs will take in 2023 as more mortgages come up for renewal and how different markets will perform as the economy slows.

Geopolitical chess is a mess: The Russian invasion of Ukraine shows no signs of ending, China and the U.S. are vying for power, OPEC is restless, recession looms over Europe and the decades-long experiment in more, rather than less, open global trade is under serious threat. How a small, but mighty, trading nation like Canada positions itself on this global geopolitical chessboard is not clear, but 2023 will continue to present challenges in this regard.

The (last?) new oil pipeline out of Alberta: Regardless of where you stand on what to do about global carbon emissions, the future growth of Alberta’s oil and gas exports are constrained by a lack of additional pipeline capacity out of the province. The TransMountain pipeline expansion project is an exception to this rule. The project is scheduled to be completed toward the end of next year and will take the capacity of the pipeline from 300,000 barrels per day to 890,000 barrels per day.

Labour shortages: The slowing of the economy in 2023 will put upward pressure on the unemployment rate, but the widely reported labour shortages of 2022 will continue if not get worse 2023 and after. The main driver of this is the aging of the population. There are plans to increase immigration to address the shortfalls, but an overly “tight” labour market will take time to loosen.

Answer to the previous trivia question: Apple Computer Inc. first sold shares to the public on December 12, 1980.

Today’s trivia question: As this is the last Owl of 2022, we will press pause on our trivia questions and wish all of our readers a joyous holiday season and a prosperous new year! The Owl (and the trivia questions) will be back on Friday, January 6, 2023.