Alberta’s economy should gain momentum and expand past its 2014 peak next year — bringing the jobless rate down with it — but the main risk is a potential fourth wave of COVID-19 infections, says a new report.
Alberta’s economy should gain momentum and expand past its 2014 peak next year — bringing the jobless rate down with it — but the main risk is a potential fourth wave of COVID-19 infections, says a new report.
A forecast released Thursday by Alberta Central projects the provincial economy will grow by 7.5 per cent this year.
It would be the highest rate in the country, as the report expects the national gross domestic product will expand by 6.1 per cent.
“However, it is important to note that there is more ground to gain back than elsewhere,” states the report by Alberta Central chief economist Charles St-Arnaud.
“We forecast that the Alberta economy will start to expand beyond its 2014 peak at some point in 2022, erasing the contraction seen in 2015 after almost seven years.”
The new outlook comes as higher oil and natural gas prices, a strengthening housing market and a broader economic recovery take hold after a tumultuous 2020, although concerns are mounting over the recent rise in COVID-19 cases.
Alberta saw the steepest economic decline in the country last year, with the dual impact of the pandemic and an unprecedented collapse in global oil prices. On Thursday, benchmark U.S. oil prices closed just above US$69 a barrel.
Higher commodity prices are assisting the province’s largest industry and St-Arnaud expects the value of all oil produced in Alberta will hit an all-time high this year.
In April 2020, as production was shut in and prices crashed, the value of all oil produced in the province dipped below $1 billion, but the number likely rebounded to between $8.3 billion and $8.8 billion last month, he said.
“There are some very good tailwinds for the economy,” St-Arnaud said in an interview.
“The value of oil production in the province will hit a record in July; that’s almost a guarantee. It doesn’t mean suddenly oil companies will boom and start spending more on capital investment and rehire everyone. But it’s a positive push in the right direction.”
While he doesn’t expect to see a hiring spree by petroleum producers, St-Arnaud believes sectors hit hardest by the pandemic, such as in the hospitality and tourism industry, will continue to bring jobs back.
The report projects the unemployment rate, which sat at 8.5 per cent last month, will drop to 6.7 per cent by the end of the year, and dip to 6.2 per cent by the end of 2022 — although still above the Canadian average.
Housing prices are expected to remain strong and disposable income levels will rise faster than in other parts of Canada, pushing up consumer spending levels.
A fourth wave of the pandemic remains the main downside risk to the forecast, as more cases of the highly transmissible Delta variant are recorded.
On Thursday, the province reported 550 new COVID-19 cases, its highest number since May.
“The vaccination rate of some regions of the province remains worryingly low,” the report states, noting about a quarter of Albertans reside in a region where vaccination levels are below 60 per cent.
“There is a risk that some restrictions, at least at a local level, will need to be reinstated to slow a possible fourth wave, temporarily reducing the speed of the recovery.”
Some forecasts have pegged Alberta as leading the country in growth after the economy contracted by a staggering 8.2 per cent last year and thousands of jobs were lost.
The Conference Board of Canada recently projected Alberta’s economy will expand by 7.2 per cent in 2021, while RBC forecast Alberta’s GDP will grow by a more modest 5.9 per cent, slightly below the national average.
“We are obviously seeing an extraordinary recovery taking hold this year, it’s just not quite enough to bring us back to where we were in 2019,” RBC economist Carrie Freestone said in an interview.
“We are still seeing 35,000 jobs that have yet to be recovered. But the fact Alberta is going ahead lifting restrictions, that is a positive.”
Calgary Chamber of Commerce CEO Deborah Yedlin said Alberta had a “bigger hole to dig out of” than other parts of the country but noted business sentiment is improving with the economy reopening. However, what happens next in the pandemic will be critical.
“Because we have had an opportunity to open up and able to do some things successfully, I think that is giving people some level of optimism,” Yedlin said.
“But the worst thing would be if we had to take it away again … We have had a taste of what is possible, and we have to continue to be mindful that the Delta variant doesn’t discriminate and could have other plans for us.”
Strained supply chains, inflationary pressures in the pipeline and worries about the health of the labor market. Sound familiar? This is the US in 1945 as President Harry S. Truman tried to engineer an end to World War II and minimize disruptions that would accompany peace.
The role of the atomic attacks on Japan, fears of Russian encroachment and the collapse of Japanese industry are well charted in discussions surrounding Tokyo’s capitulation on Aug. 15, 1945. Less well known is the impact of financial and commercial tensions developing on the home front. I spoke to Marc Gallicchio, professor of history at Villanova University and author of “Unconditional: The Japanese surrender in World War II,” which dives into the debates within Truman’s team about ending the war, including fears of an impending economic calamity.
These concerns didn’t stop at America’s shores. What did planners envisage for Japan’s economy and did they drop the ball by not thinking more about the prospect that China — a wartime ally — would one day challenge the US? The conversation has been edited for clarity and length. DANIEL MOSS: Describe domestic economic conditions and how were they shaping Washington’s decisions in 1945?
MARC GALLICCHIO: From early that year, with the impending defeat of Germany, people were beginning to look past the war. Not only the general public, but also business leaders, who were concerned that not enough emphasis had been placed on reconversion to a peacetime economy. If peace burst upon the US suddenly, the economy would be unprepared. Manufacturers were still in wartime mode, primarily producing goods for the military. There were restrictions on consumer activity, there was food rationing, price limits imposed. There was anxiety that if the war ended suddenly, all these soldiers and sailors would come home and the domestic economy would be in no shape to absorb them into the workforce.
There was this rising chorus of complaints among executives and legislators — you begin to see it in the newspapers — that the army is absorbing too much manpower and material. Now that they have a one front war to fight, the questions were increasingly about why so much was needed to fight just Japan when they had been fighting both Japan and Germany? The worry was all these wartime jobs and contracts would end and business would not be ready make the transition to domestic production.
There was great fear of unemployment. That turned out to be less of a problem than expected, but access to consumer goods and worries about inflation were real issues. By the early summer of 1945, the coal industry was warning that unless it could get more miners, there would be shortages. For that they needed personnel released from the army, which was reluctant. Moving people and goods across the US was becoming more difficult after four years. There was a lot of track maintenance that needed to be done. So there were petitions for the early release of people from various professions and the military just didn’t want to do that.
DM: What priority did Truman give these economic pressures, given the development of the atomic bomb and worries about the implications of Russia’s entry into the war against Japan?
MG: Before Truman went to the final summit of the war at Potsdam in July, he sided with the army. But Treasury Secretary Fred Vinson, in whom Truman had great confidence, opposed the army’s position. It’s not clear what Truman would have done if he didn’t have the bomb.
Truman receives these extraordinary cables from Vinson at Potsdam telling him there will be a serious crisis if the US doesn’t move more forcefully toward reconversion. Vinson starts to suggest that surely the army doesn’t need all these resources. We need unconditional surrender, but maybe we can get there through blockade and bombardment, which would allow for fewer men. The military was against that view because they believed it would lead to a protracted war, the American public would lose interest and the Japanese would use that to their advantage. What Vinson was proposing in order to avoid disaster was a modification of unconditional surrender. He didn’t outright say that, but that would probably have been the result.
Truman learns in Potsdam that the bomb can be deployed months before the scheduled invasion of Japan and probably before Russia came in. I don’t think he thought the bomb would keep Russia out, necessarily. His first reason for using it was to bring about the defeat of Japan, though he may have viewed the possibility that the war could be over before Russia got too far into Northeast Asia as a bonus.
The bomb made invasion unnecessary. It also meant this slow-moving crisis in the US economy could be addressed.
DM: There was intense debate over whether to modify the demand for unconditional surrender in hopes of coaxing Japan to lay down its arms. What kind of compromise, if any, was made?
MG: The idea that an imperial institution would remain never made it to the statement issued at Potsdam. But there was this idea of a liberal peace that would allow the return of soldiers to Japan, allow the country to re-enter the world community, have access to raw materials abroad — as opposed to control of them. Japan would be incorporated into a liberal postwar international economy. They could have a government of their choice once they have convinced the peace-loving nations of the world that they would no longer be a threat. You could read between the lines and say that if the emperor shut things down quickly, he would be someone who could lead Japan toward that state described in Potsdam.
DM: The struggle against Covid has often been framed in martial terms. Did the US have what amounted to a wartime economy during the peak of the pandemic?
MG: We didn’t get extensive regulation of the overall economy. There were big restrictions on bars, restaurants, airlines. State support was there, but it wasn’t as omnipresent during people’s lives as during WWII. What didn’t surprise me one bit was the enormous demand to lift restrictions on social lives and the economy.
We have this collective memory of WWII as being a time when there was unity, where everyone was willing to sacrifice and that’s contrasted with later wars like Vietnam, where there was a lot of controversy. But by 1945, that just wasn’t the case. There was growing dissent, a great deal of anger, directed particularly at the army.
DM: Did US officials give much thought to what Japan’s economy might look like after the war?
MG: There was clash between New Dealers and business-friendly planners and advisers to Truman. People like Henry Stimson, Secretary of War, and Joseph Grew, Undersecretary of State, saw Japan as having done a remarkable job of industrialization since the late 19th century. They didn’t see the monarchy as an inherently dangerous institution, as far as the US was concerned. All you had to do was sweep away the militarists. Their fear was that if you did away with the emperor and undertook deep, extensive reforms, that would sow the seeds for revolution and communism.
Then there were New Dealers who saw the problems as much deeper. They felt that in the process of modernization, Japan never moved beyond a feudal structure. They thought the emperor’s status enhanced the power of the military and the big industrial conglomerates. In order to get a really democratic Japan, you have to do away with the emperor, do away with big trusts and democratize Japan socially and economically. Liberate women, allow unions to properly organize and so on.
A lot of critics of unconditional surrender said after the war that Truman should have told Japan it could keep the emperor, since that is what ended up happening anyway. But it’s important to note that after unconditional surrender, the emperor did not have the same authority that he would have had if Truman had committed to keeping Hirohito on the throne. In the end, the US was able to implement a host of significant reforms because Truman insisted on unconditional surrender and occupation. One of the biggest reforms was a new constitution that reduced the emperor to the figurehead that Grew and Stimson mistakenly claimed he had always been.
DM: In 1945, what would they have thought if told that China would emerge as the key rival to the US?
MG: There was not much anticipation of China playing a leading role in the Far East for quite some time. That was in part the reason why people like Stimson and Grew thought it necessary to build Japan back quickly so it could be a force for stability. None of them foresaw a juggernaut emerging in China.
DM: Was it a mistake to pay insufficient attention to what China might become?
MG: China kind of gets pushed off the page. American military thinking was sequential in that the goal was defeat Japan first and then look over the horizon and see what is out there. It might seem like short-sighted policy, but the view was “look, if we have Japan, we can keep the rest of the world out of the Pacific and we will be able to defend the US come what may in China.”
People just wanted to be done with it, to bring the boys home. Even though American power was at high tide, that tide was also starting to run out. The staying power wasn’t there.
More From Bloomberg Opinion:
• 1947, 1970s, 2008. Take Your Pick, Inflationistas: Daniel Moss
• What the World Got Wrong About Shinzo Abe: Gearoid Reidy
• WWI History Is Wrong, and Skewing Our View of China: Hal Brands
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously, he was executive editor of Bloomberg News for economics.
More stories like this are available on bloomberg.com/opinion
©2022 Bloomberg L.P.
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Inflationary pressures in the US simmered down on the heels of cheaper gasoline and other fuel costs, which may help persuade the Federal Reserve to ease up a touch on the monetary policy brakes.
In the UK, the economy shrank in the second quarter for the first time since Covid-19 lockdowns more than a year ago. Singapore reduced its growth forecast for this year after its economy contracted last quarter, while rapid inflation encouraged steep interest-rate hikes by monetary authorities in Mexico and Argentina.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
Inflation decelerated in July by more than expected, reflecting lower energy prices, which may take some pressure off the Federal Reserve to continue aggressively boosting interest rates. Consumer prices increased 8.5% from a year ago after hitting a more than 40-year high of 9.1% a month earlier.
Ending emergency unemployment benefits had a significant impact on boosting employment, according to a St. Louis Fed working paper that may underline Republican criticism of a 2021 program.
Rental costs are soaring at the fastest pace in more than three decades, surpassing a median of $2,000 a month for the first time ever.
The UK economy shrank in the second quarter for the first time since the pandemic, driven by a decline in spending by households and on fighting the coronavirus. Gross domestic product fell 0.1% after an 0.8% gain in the first quarter. The Bank of England expects that inflation raging at a 40-year high will tip the economy into a recession later this year.
Spain is opening its doors to foreign workers to fix labor shortages and ease a demographic slump threatening its future prosperity. In contrast with more anti-immigrant politics in much of Europe, the government has loosened rules to allow the recruitment of employees in their countries, mostly in Latin America, for both skilled and unskilled jobs that are hard to fill.
Singapore trimmed its 2022 growth forecast to reflect an increasingly challenging global environment, after the economy slipped into contraction in the second quarter. Final data for the June quarter Thursday showed gross domestic product shrank 0.2% from the previous three months, and worse than the zero growth estimated by Ministry of Trade and Industry earlier.
A global spell of high inflation, aggressive monetary tightening and the risk of a recession are prompting economists to revise Indonesia’s economic forecasts for the remainder of the year. Analysts raised inflation projections for the third and fourth quarters by almost a full percentage point to 5% and 5.15%, respectively, median forecasts from Bloomberg’s latest monthly survey showed.
Argentina’s central bank raised its benchmark Leliq rate to 69.5%, representing the largest hike in almost three years and signaling a more aggressive stance against surging inflation. Mexico’s central bank boosted its key rate to an all-time high of 8.5%.
Brazil consumer prices tumbled by the most on record in July after President Jair Bolsonaro slashed utility taxes to tame the soaring cost of living and lift his re-election chances.
Kenya’s presidential election took place Tuesday as East Africa’s largest economy grapples with surging living costs and rampant unemployment. Deputy President William Ruto and Raila Odinga, a former prime minister who’s running for president for a fifth time, were the clear front-runners to succeed incumbent leader Uhuru Kenyatta. Final results are expected by Aug. 16.
When Group of Seven leaders gathered in the Bavarian Alps in June, they pledged to stand with Ukraine for the long haul. Their Group of 20 counterparts are proving less supportive. Only half have joined the international sanctions imposed on fellow member Russia over its invasion of Ukraine.
Chinese exports to Russia are back near levels seen before the Kremlin’s invasion of Ukraine, propelling a rebound in trade that’s helped cool off a historic rally in the ruble. Russia bought $6.7 billion of goods in July from China, an increase of more than a third from the previous month and up by more than an annual 20%.
Bloomberg interviewed several families — in Nigeria, India, Brazil and the US — various times between June and August last year about the swaps and sacrifices they were making in order to keep food on the table as prices rose. It turns out, chronicling what was then eye-popping food inflation wouldn’t capture the depths of what was to come.
©2022 Bloomberg L.P.
When athletes stood on the podium during last summer’s Tokyo Olympics, the medals hanging from their necks were made from melted-down metals in six million old cell phones and other discarded electronics.
Others, nowadays, enjoy having their home moderated by insulation made from the excess scraps of denim that don’t get to become jeans.
Those are two examples of the circular economy that researchers say could recover $4.5 trillion worth of otherwise wasted resources by 2030. Keeping materials out of the landfill in the market is something the City of Victoria hopes to capitalize on as it adds a circular lens to its 20-year economic strategy.
Spurred by a motion from Coun. Jeremy Loveday, the city will now add a section to Victoria 3.0 on becoming a national leader in the circular economy.
“Making sure our economic priorities align with our goals regarding climate action and waste reduction, I think this helps us also to be in a better place to capitalize on the economic benefit of the circular economy which is predicted to continue to grow,” Loveday said before council approved the motion this month.
The action will include ensuring there are zoned areas for circular businesses and non-profits to operate within the city. Those will include light industry spaces, which Victoria-based Project Zero says reduces a key barrier for entrepreneurs trying to scale up their up-cycle or repair businesses.
“There isn’t anything right now that’s on that smaller scale or that’s financially accessible,” said Georgia Lavender, who leads Project Zero’s circular economy program.
The non-profit has been running a local entrepreneur incubator for five years, but the term “circular economy” was still new to people a couple of years ago, she said. But Lavender has been inspired lately by all sectors and levels of government seeing the approach as a way to support local innovation, job creation and supply chain resiliency.
“We’ve seen a really big shift toward regions wanting to implement a circular economy model and really seeing the opportunities it holds, not only from an environmental perspective but also an economic development perspective,” she said.
Some of Project Zero’s Victoria start-ups now commercializing include the cup-share service Nulla and BinBreeze, which uses waste wood to improve compost bin productivity and pest deterrence.
Lavender said the innovators are helping to cut emissions while creating jobs, and Vancouver Island as a whole has the opportunity to position itself as a leader in the circular sector. The focus could help the supply chain be more resilient, Lavender said, by using local manufacturing to reuse resources instead of shipping waste off the Island for processing.
The Victoria direction also commits to business space in the coming Arts and Innovation District, the creation of a circular economy hub, exploring partnerships for a zero waste demonstration site and launching an innovation grant.
“Things like that just create more opportunity for these ventures to keep their operations within Victoria and not have to move to other regions,” Lavender said.
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