Given that the supercharged growth of the Calgary economy has been fuelled almost exclusively by the rapid escalation in petroleum and natural gas prices which started in early 2007, it’s not surprising that growth stopped when energy prices crashed in mid 2008.

Probably the best indication of Calgary’s economic deterioration is that its unemployment rate has increased from a very low 3.3% to a 13-year high of 6.9% in just 12 months.

During this period, total employment in the CMA has dropped by almost 11,000 and the number of employment insurance beneficiaries has jumped from 3,970 to a record high of 19,000.

Across major industrial sectors, employment in retail and wholesale sales is down by 15.1% year over year, followed by natural resource industries (-14.5%); finance, insurance and real estate (-12.6%); professional and business services (-11.9%); and manufacturing (-8.1%).

Industries in Calgary which have added jobs over the past 12 months include: business, building and support services (+36% y/y); education services (+17.4%); information, culture and recreation (+16.7%); public administration (+11.7%); transportation services (+11.3%); and construction (+6.5%).

Looking forward, in view of the fact that residential building permits in Calgary are down by 48.6% year to date, industrial permits are down by 80.4%, and commercial building plans are off by 40.8%, the near-term outlook for residential and non-residential construction in the CMA is weak.

Having said this, the recent approvals of several large institutional building projects including the South Health Campus and the Mount Royal College Auditorium have caused the value of institutional construction plans to increase by over 200% in the first half. This should provide much needed support to construction activity and employment during the remainder of the year and into 2010.

Moreover, given the sharp drop in the cost of homeownership in Calgary, existing home sales have picked up strength over the past four months, thereby setting the stage for a recovery in new construction midway through next year.

Finally, higher oil prices should contribute to a partial recovery of Calgary’s energy sector, helping to support the CMA’s recovery through next year.