Numbers on why this recession is not that bad
All recessions are tough – but the sky is not falling. Below is one of the better articles we have seen on why this one will not be that bad.
Mortgage Mark Herman,
Calgary Alberta mortgage broker for home purchase and mortgage renewal.
Only two recessions in Calgary since 1987 and both more severe than 2015 forecast
While Calgary’s economy has been sluggish this year and most experts are forecasting a recession, it will be a mild one compared with what the city has gone through in the past.
According to the Conference Board of Canada, since 1987, the Calgary census metropolitan area economy has contracted only twice – by 1.9 per cent in 1989 and by 4.0 per cent in 2009. And the city has shown throughout the years it can and does bounce back following years of recession.
The board is forecasting Calgary’s economy to decline by 0.5 per cent in 2015.
During that period, its most productive year was 1997, when the economy grew by 7.9 per cent.
Although Calgary’s economy is in a tough spot this year, the city has seen worse over the years, said Todd Hirsch, chief economist with ATB Financial.
“It’s a theme I’ve talked about quite a lot. Yeah, it’s a downturn. It’s going to be a recession, but by no means I don’t think is this going to be the worst one the city or the province has ever seen,” said Hirsch.
“Where most individuals start to notice it is in the job market. All these other indicators like output and manufacturing, or the real GDP, where people will feel it is when they’re laid off. And 1989, or even earlier in the 1980s, we had double-digit unemployment rates in the city and in the province. This time around I don’t think we’re going to get anywhere near to double-digits.”
In August, Alberta’s unemployment rate was six per cent while it was 6.6 per cent in the Calgary census metropolitan area. Hirsch said he does expect those numbers to increase over the next couple of months, cresting over seven per cent.
“But I think a lot of what will help Alberta this time around is that there is – it doesn’t always feel like it – but there is more diversity in our economy,” he said.
“We bounce back with regularity because every time these oil prices drop, even if the oil prices don’t come back immediately, companies get their costs down and then everything re-balances a little bit. Getting the costs down and re-balancing is often a little bit painful because it does mean layoffs but every time the re-balancing happens, the city comes out of it in good shape.”
Gillian McCormack, vice-president of business development for Calgary Economic Development, said the city’s economy does tend to bounce back following recessions.
“Over time we’ve diversified, which is really continuing to allow us to weather the storm as we have others,” she said.
“What we look at when it comes to diversification is what we call purposeful diversification. So that really allows us to make sure that we’re focusing on key areas of opportunity for Calgary and really where we think we can make some significant progress.”
Those areas include agribusiness, renewable energy, transportation and logistics, innovation and energy technology.
“We continue to experience population growth for example. People continue to recognize that Calgary is a great place to live, work and play,” said McCormack.
“Each time that we’ve faced a recession we have looked at it with a view of resiliency and come out even stronger on the other side. So we expect that to be the case this time around as well.”
Bob Schulz, professor of strategic management with the University of Calgary’s Haskayne School of Business, said the city experienced worse economic downturns in the past, such as when oil dropped to $9 a barrel in the mid-1980s and in the early 1980s with the introduction of the National Energy Program.
“This one is different because the technology has changed,” he said. “What the technology has done with fracking is it’s expanded the available reserves at prices that would be competitive with Alberta oilsands prices. The (recessions) in the 1980s, the first one was because the federal government was taking more money out of the oil business and the second one was because the world oil price went way down because there was too much supply by the Middle East.
“And the 2009 one was due to the world economy. This one is due to increased supply coming from fracked oil in the U.S. That’s never happened before.”
Coming out of this recession could take longer than previous ones, said Schulz.
“The people who are most concerned are the ones that haven’t gone through this before,” he added. “On the other hand, there are people who have done this before and what I am hearing now is that it hasn’t happened like this for 30 years. And the expectation before was that eventually demand will catch up with supply. But in this one, the supply can actually go up faster than the demand right now.”
http://calgaryherald.com/business/energy/only-two-recessions-in-calgary-since-1987-and-both-more-severe-than-2015-forecast