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Study: The Alberta economic juggernaut

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The Daily

Thursday, September 14, 2006

Alberta is in the midst of the strongest period of economic growth ever recorded by any Canadian province, according to a new study released today in the Canadian Economic Observer.

Its nominal gross domestic product (GDP) rose 43% between 2002 and 2005, and there is no sign of slowing down so far in 2006. As a result of this unprecedented boom, Alberta has the highest share of its population employed and the lowest unemployment rate of any province or state in North America.

The 12.7% average annual growth of Alberta since 2002 compares favourably with China's 14.8%, the fastest rate among the world's large economies. But, while China's growth was mostly volume, Alberta's was mainly driven by higher export prices. Still, its 4% average increases in real GDP were the fastest in Canada after 2002.

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Alberta's per capita GDP reached $66,275 in 2005, nearly double the average income in 1995 and 56% above the national average. This deviation from the national average is the largest ever posted by a Canadian province.

Profits in Alberta more than doubled from 2002 ($23.5 billion) to 2005 ($53.1 billion). Most of this increase reflects the soaring price of oil and gas exports. Alberta accounted for 27% of all profits in Canada in 2005, nearly double its share of national GDP.

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Buoyed by ballooning profits, business investment expanded 37% over the last three years, including a 17% jump in volume last year. Firms plan to increase nominal outlays another 11% in 2006. Most of the growth of course was in the energy sector, especially the oilsands north of Edmonton. The investment boom shows no sign of ending anytime soon.

Consumer spending in the province remains by far the strongest in Canada. So far this year, nominal retail sales are running an astonishing 17% ahead of 2005, on track for the best year of any province ever.

Despite this spending splurge, Albertans have the highest personal savings rate anywhere in Canada, at 5.1% last year. In fact, it was the only province other than Ontario where the savings rate was not negative.

Housing demand exploded 17% last year, partly because more people moved from other provinces. Housing starts in Alberta recently surpassed Quebec, despite having less than half its population, a testament to the rapid increase in Alberta's population. However, shortages have sent new housing prices soaring in 2006.

Over the last decade, Alberta has consistently had Canada's strongest labour market. When adjusted to a comparable basis with the United States (which excludes 15 year olds), Alberta's 2.9% unemployment rate in June was the lowest of any province or state in North America, while it had the highest employment rate at 71.7%.

Job growth since 2002 has been led by mining, which has jumped by 30,000 jobs (or 33%) over the last three years and by 71% since 1999. As a result, it is now the sixth largest employer in the province, up from twelfth in 1999. In the northeastern part of the province (which includes the oilsands), one in every five workers is employed by the oil and gas industry.

There are several manifestations of Alberta's labour scarcity. The latest Business Conditions Survey found that one-quarter of Alberta's manufacturers reported shortages of unskilled labour, up from just 2% as recently as 2003. Partly this reflects labour in relatively low paying areas such as farming, manufacturing and accommodation and food being siphoned off by the booming construction and mining sectors.

Alberta's hourly earnings now lead the country at $20.94, passing Ontario, which has traditionally had the highest wages. Hourly earnings in Alberta have risen by over 7% in the 12 months ending in June, including an increase of over 10% in Calgary. This reflects both wage hikes and jobs shifting to high-paying sectors.

Alberta's population has grown faster than any other province every year since 1996. This increase reflects large inflows of migrants from other provinces and a rising number of births (it is the only province where births have increased in absolute terms since 2000). Alberta attracts relatively few immigrants from abroad — they gravitate mostly to Toronto, Vancouver and Montréal.

Alberta has the youngest as well as the fastest growing adult population, with 57% of people in Alberta less than 45 years old last year. Ontario was next at 54%, while most of the other provinces were near 50%. Partly, this reflects more births, but mostly it is because migrants tend to be relatively young.

While the boom has brought unbridled prosperity to Alberta, some worrisome long-term effects have emerged. Most notably, rural Alberta has one of the highest rates of high school drop-outs in the country at about 25%, presumably spurred by the promise of attractive pay for relatively unskilled work. However, this leaves these youths ill-prepared to deal with the consequences of a slowdown in growth.

Definitions, data sources and methods: survey numbers, including related surveys, 1901 and 3701.

The study "The Alberta economic juggernaut: The boom on the rose" is included in the September 2006 internet edition of Canadian Economic Observer, Vol. 19, no. 9 (11-010-XIB, free), which is now available online from the Publications module of our website. The monthly paper version of Canadian Economic Observer, Vol. 19, no. 9 (11-010-XPB, $25/$243) will be available Thursday, September 21.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Philip Cross (613-951-9162;, Current Economic Analysis Group.