Three years after the start of a devastating recession, Calgary’s economy is growing, but is being held back by high unemployment and downtown office vacancy rates.
And that is proving to be a challenge for everyone from graduating post-secondary students, to small businesses and city taxpayers.
Economic Outlook 2019, held on Oct. 3 at the Calgary TELUS Convention Centre, featured a series of speakers who discussed past trends and future projections of various economic metrics like growth, employment, and consumer confidence in Calgary and beyond.
Economic Outlook, which occurs annually, is hosted by Calgary Economic Development, a not-for-profit funded by the city and various community partners.
Its goal is to attract business investment to the city.
After Calgary’s lacklustre economic performance in 2015 and 2016, growth rates within the province are the highest in the nation, Mayor Naheed Nenshi told the conference.
“Alberta will lead the country in economic growth this year, and it will continue to grow, and continue to grow well,” said Nenshi.
Real GDP growth in 2018 is projected at 2.6 per cent, but is expected to slow to 2.2 per cent in 2019, said Todd Hirsch, chief economist at ATB Financial.
These projected growth rates are less than half of what the provincial growth rate was before the economic downturn, a discrepancy due to the lack of a true recovery within Alberta’s oil and gas industry, said Hirsch.
“The energy sector is no longer as strong a growth engine at it used to be in our economy but it is still the backbone of the economy,” said Hirsch.
“You want to take care of your backbone.”
Being less reliant on the energy sector could ultimately be beneficial to the city and province, said Hirsch.
“It is a slower, more moderate rate of growth, but it is one that will encourage more stability, more diversity, and a healthier economy for Calgary and Alberta,” he said.
Despite growth rates improving throughout the province, Calgary still faces a precariously high unemployment rate, said Nenshi.
“After many months of declines in our employment rate, we now see, over the last seven months, a real stagnation or flattening of the employment rate,” said Nenshi.
“This recovery is starting to look like a jobless recovery, and that’s not good.”
Calgary’s high unemployment rate, which is largely a product of job losses in the energy sector, has been ameliorated by the growth of other industries, said Hirsch.
“In other sectors of the economy, we’re seeing job creation, so the composition of the job market is changing,” said Hirsch.
“But we still need more jobs and get that unemployment rate lower.”
Another major challenge holding back the recovery in Calgary is high commercial vacancy downtown, which has reduced the city’s tax revenue, said Nenshi.
“Our flexibility, and our ability to adapt and change is severely constrained by that downtown vacancy rate,” said Nenshi.
Downtown vacancy rates in Calgary are at a record high, said Pedro Antunes, deputy chief economist and executive director of the Conference Board of Canada.
“[Vacancy rates in Calgary are] in line with the vacancy rate we saw in Manhattan during the Great Depression,” said Antunes.
Calgary’s high vacancy rate is a double-edge sword for economic recovery, as it could attract new businesses to the city, but will also curtail potential growth from construction activity associated with the creation of new business spaces downtown, explained Antunes.
“This is an opportunity in some respects – this will bring people into the city,” said Antunes.
“But our senses are that this is going to be a strain on the supply side.”
There’s no quick fix to the high vacancy rates downtown, said Steve Allan, the executive chair for Calgary Economic Development, in an interview.
“We’ve gone through these little swings, and occasionally we overbuild, but then we’re able to absorb that space.
“But that’s not happening this time because changes to the energy industry are structural,” Allan said.
“It’s going to be a long game.”
Despite the challenge caused by high unemployment and downtown vacancy, there is reason for hope, said Nenshi.
“We can clearly see we are in good recovery mode.”