The Leduc-Nisku EDAtorial
Leduc Blog
Economic Update - Times of Change: Leduc Regional Chamber of Commerce Mayoral Address Luncheon Presentation
March 04, 2016
Barbara McKenzie

Corresponding Powerpoint Presentation Slides 

I am sure that there is not one of us in this room who has not been impacted by the dramatic shift in our economy in the last 18 months.  From the peak of prosperity and oil prices in early 2014, to above national average unemployment rates and the lowest oil prices in over a decade in early 2016, the times have certainly changed.

Our region has grown up on oil and gas; it has seen ups and downs, and this is certainly a down.  Over the last 18 months we at the EDA have gathered data, read articles, attended presentations and done our best to assimilate and analyse the wide diversity of information out there on the future of energy prices, and our industry.

I could go on for hours about all that we have learned, but Jen only gave me 10 minutes so I will hit some high points. I invite you all though to connect with us, you’ll see info on that later in the presentation. First, there is no silver bullet, there is no right or wrong – economists don’t know, investors don’t know, the industry does not know and the government does not know. The consensus is that we all need to learn to adapt and change and live with a lower for longer environment.

If you follow me on Linked In you’ll see articles from a variety of analysts and none of them agree.

So where are we in Leduc today?

Slide 3:
In January 2016, Canada had an unemployment rate of 7.2 per cent, with Alberta’s unemployment sitting at 7.4 per cent. Full-time employment has gone down year over year by 73,000 with only 35,000 part-time jobs created. The total manufacturing job loss in Alberta is a staggering 22,000 positions or 15 per cent of all manufacturing jobs in the province.

If we do some extrapolation as no specific data exists for our region as we are lumped into the Capital Region, we can do some general assumptions – we know total manufacturing jobs in the Leduc Region was approximately 5000 in 2014. If we go by the 15 per cent factor provincially, we can estimate that we have lost approximately 750 manufacturing jobs in the Leduc Region. Remember that is only manufacturing – we are not even looking at the direct jobs in energy, and the indirect jobs in so many of our other industries such as hotels, services or engineering. That said, low unemployment causes stressors in the economy as does high unemployment.

Slide 4:
Vacancy rates are highest in the Leduc and Nisku Industrial parks at approximately 15 per cent with approximately 2300 companies in the area. Based on vacancy rates, there have been approximately 300 business closures in the last 18 months. This varies from small to large with Enerflex shutting down its Nisku facilities in June displacing 500 employees to many of our small and medium sized businesses (less than 100 employees), which make up 95% of the business in the region.

Slide 5:
The price of oil –  I’ll go with the only ones who were right in 2015 about where we would be – the Conference Board – they provided their outlook on Wednesday at $37 per barrel for 2016, $40 for 2017 and $50 for 2018.
Slide 6
We still have more than 92 per cent employment, but where are we headed?

Slide 7:
We track regional traffic data as a “soft” indicator of the overall rate of activity in the region. We saw a significant increases in traffic activity from 2013 to 2014 but know that this will drop in 2015 to 2016 rates have not been released yet by Alberta Transportation.

Slide 8:
Commercial and Industrial permits give us a great indicator of investment into the region and new business locating in the region, and 2015 was a very challenging year. So much capital investment was halted that many of the businesses we were working with and that our local real estate community was working with simply put their expansion and location projects on hold. This hold on projects resulted in a significant decrease in construction and permit applications in 2015 as outlined here.

Slide 9:
On Wednesday the Conference board provided its projections for GDP and as you can see, we saw negative growth in 2015 and will experience it again in 2016. There is a cautiously optimistic few for moderate growth in 2017, but nothing like what we saw from 2010 – 2014.

Slide 10:
So what does the future hold?
To put it briefly: markets don’t know and will continue to adjust to the price of the commodity; Alberta is a high cost market for production without significant tide water access; investors are not investing and capital is being withdrawn and held as companies work in the lower for longer environment; Oil and gas services and supply will be especially hard hit meaning there will need to be consolidation in the industry and a shrinkage of companies as producers look to reduce their costs to be competitive. We need to accept that we are in a carbon competitive environment.

What can companies do?

Companies need to look at export markets – Alberta technology, expertise and quality is highly valued in the global marketplace and there are opportunities abroad. They need to use technology, data, research and development and innovation to create efficiencies and enhance labour productivity to work in the lower for longer environment and become cost competitive. Companies may also need to look at new industries – do not shy away from the other aspects of the energy industry – there are opportunities in green energy that are uniquely suited to oil and gas services companies, drillers, manufacturers, carbon reduction, environmental technology and so much more. There are opportunities, industry just has to be willing to seek them out.

Slide 11:
At the EDA we are focused not only on bringing new business to the region to help diversify our economy and stabilize us for long term growth and prosperity, but we are also focused on providing information and expertise to existing companies to help them seek out new opportunities.

While 85 per cent of businesses in Alberta do business solely in Alberta, there is a wide global market that values Alberta's expertise, technology, innovation and high quality products – there is a market even in oil and gas globally for what we do here.  
Our ABC’s of exporting event on March 22 is a practical hands on session about what you need to do to export and what opportunities are out there for all sectors – energy, manufacturing and agriculture.  Come to the event or tell someone you know who could use this advice.

The Green energy market is coming, it has been proliferating around the world for decades and we in Alberta have a strong opportunity to leverage our innovation and entrepreneurial skills to pivot and capture market share.  Join us at our Green Energy Opportunities event on April 21 to learn how to get into the business of green energy and how local manufacturers can leverage this.
Check out our website for more.  Follow me or the EDA on Linked In and sign up to our newsletter to read my blog on ideas and thoughts on our regional economy.

Thank you.