An economic forecast from the Alberta Business Council says a tight labour market coupled with high commodity prices — especially oil and gas — will give the province a smoother road ahead compared to the rest of Canada.
Even with consumers feeling the pinch of inflation, report co-author and council economist Alicia Planincic says any potential recession will feel milder in Alberta as those higher commodity prices will fuel demand for labour.
That will, in turn, help the province catch up to other provinces in wage growth.
"I think we've got a white-hot labour market and lukewarm wage growth. My hope is that that is also white hot in the in the next couple of months," she said.
She says employee salary increases have lagged behind the rest of Canada in the last year or so, and that has led to a decrease purchasing power for Alberta workers when inflation is factored in.
However, given that Alberta already has higher wages than other provinces on average, employee salaries have been moving up more slowly.
Still, she says, that should change in the coming months.
Another Alberta economist agrees with this assessment.
"What we're seeing is actually a convergence where because wages are higher in Alberta, there's less of an increase while Canada's wages are increasing faster. You're actually seeing what's often named the 'Alberta wage advantage,'" said Charles St-Arnaud, chief economist with Alberta Central, who was not involved with the report.
"It's just that now with inflation, it seems like it's actually showing the trend a bit more strongly."
With the unemployment rate sitting at 5.8 per cent and the job vacancy rate at 5.1, that means there are 1.1 job seekers for every job opening in Alberta — a huge change from recent years.
Planincic says 2023 could be the year for employees to take advantage of the labour market and ask for more money.
"If businesses want to hire — and they do, most of our businesses are reporting they do want to increase staffing — they're going to have to entice workers who already have a job. And usually you do that with a higher offer," she said.
Oil, gas and grains are up
Overall, she says the economy will be buoyed by higher commodity prices as production volumes continue to stay high.
"That will help to support Alberta, kind of the opposite extreme that we saw in the 2020 recession where Alberta was hurt more. So in this case, we would actually be certainly not unscathed but in a much better position," Planincic said.
Oil and gas production has risen 5.3 and 2.0 per cent, respectively, year-over-year. Prices, though down from their peak earlier last year, still remain strong, which will also drive growth.
The agricultural sector has also seen a strong, 70 per cent increase in 2022, after a poor crop due to extreme drought in 2021.
Inflation got us down
With the conflicting head and tail winds on the provincial economy, the report says people are feeling less optimistic about the economy, citing an Ipsos poll that says inflation is bringing consumers' mood down.
Affordability is an issue, St-Arnaud says, that could also be on the horizon for Calgary, at least as home prices have not dropped at the same rates as other cities in Canada while mortgage costs and rents have gone up.
Planincic says that as Calgary attracts more people to the city because of its comparative affordability, home prices will be driven up by demand.
"That's definitely something that we want to watch over the next couple of quarters to see what that looks like, because we've had an extraordinary, you know, 20,000 more people choose to call Alberta home," she said.