As the Alberta economy heads into 2008, it is clearly growing well above its long-term production potential.

This observation is based on two facts. One, the province’s unemployment rate, currently at 3.4%, has been under 4.0% for the past 14 months. Four percent is generally accepted as full employment.

Two, the employment rate, i.e., the percentage of the working-age population aged 15 and over who are employed in the province, is 71.5%. This is marginally below the historical peak of 71.63% reached in August of this year and well above the national rate of 63.7%, a record high.

Jobs Strength moves beyond the Energy Sector
While robust growth of energy and energy-related investment continue to be key drivers of Alberta’s growth, other sectors have also made significant contributions to the province’s strength over the past year: health services (+23,700 jobs); retail and wholesale trade (+22,400 jobs); and agriculture (+11,200 jobs).

Commercial Markets Strong, but Affordability a Problem for Residential
Looking forward, commercial construction in Alberta should continue to exhibit solid growth in 2008. According to commercial real estate experts, Cushman & Wakefield LePage, office vacancy rates in both Calgary and Edmonton are low and office-based employment across the province is continuing to exhibit strong +7.2% year-to-date growth.

However, deteriorating home-ownership affordability and a slowdown in net migration to the province will slow residential construction over the course of the year.

New Royalty Regime will hurt Energy Investment
The recent increase in oil prices and on-going oil sands investment are likely to support engineering construction into 2009. This outlook appears to be realistic, despite a recent announcement by Canadian Natural Resources Ltd. The company has said it plans to cut its capital spending on conventional oil and gas exploration by a third in 2008 because of the province’s new royalty regime.

However, looking beyond 2008, this announcement by Canadian Natural does send a message to major resource companies around the globe that Alberta is definitely not as energy investment friendly as it once was.

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