Calgary and Area Labour Market Report - Alberta · Calgary & Area Labour Market Report – Fourth...

Alberta Employment and Immigration

Calgary & Area Labour Market Report Fourth Quarter 2010

Calgary & Area Labour Market Report – Fourth Quarter 2010


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TABLE OF CONTENTS Introduction .....................................................................................................3

Organization of the Report............................................................................................... 3 Executive Summary........................................................................................4 The Economy.................................................................................................12

Global Economy............................................................................................................. 12 U.S. Economy................................................................................................................ 18 Canadian Economy........................................................................................................ 27

Contributory Influences ................................................................................................................................. 31 Alberta Economy............................................................................................................ 38

Contributory Influences ................................................................................................................................. 40 Calgary Region Economy .............................................................................................. 55

Contributory Influences ................................................................................................................................. 57 Trends in the Labour Market .......................................................................66

Canada .......................................................................................................................... 66 Q4 2010 ......................................................................................................................................................... 66

Alberta ........................................................................................................................... 72 Q4 2010 ......................................................................................................................................................... 72

Calgary Census Metropolitan Area (CMA)..................................................................... 77 Q4 2010 ......................................................................................................................................................... 77

Calgary & Area Employer Survey ...............................................................80 Q4 2010 Survey Results: Micro-Sized Companies (<10 Employees) ............................ 80

Job Bank Analysis ........................................................................................96 Calgary (city).................................................................................................................. 96 Communities Surrounding Calgary ................................................................................ 98 Banff/Canmore Area .................................................................................................... 100

Appendix A ..................................................................................................102 Survey Methodology .................................................................................................... 102



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INTRODUCTION Alberta Employment and Immigration provides career and labour market information products and resources, with both a provincial and local/regional focus, in order that Albertans have the skills, supports and information they need to succeed in the labour market.

This report provides labour market information and analysis for use by Albertans in learning about the labour market and career planning; by employers and industry for use in understanding and addressing labour market issues; and by the Alberta Employment and Immigration Calgary Region for use in strategic planning for programs and services.

ORGANIZATION OF THE REPORT This report contains the following information:

Economic Overview – The Calgary regionʼs economy is influenced by global economic conditions, and by economic drivers in the Canadian economy and elsewhere in Alberta. This section provides information on economic activity in the fourth quarter of 2010, as well as outlooks (where available) for the global, U.S., Canada, Alberta and Calgary region economies.

Trends in the Labour Market – This section examines labour market information for Canada, Alberta and the Calgary Census Metropolitan Area (CMA). The information provided in this section is based upon Statistics Canadaʼs Labour Force Survey.

Calgary and Area Employer Survey – This section highlights findings from a survey conducted in the fourth quarter of 2010 of Calgary and area companies with <10 employees. Results of this survey are compared to the results of a survey conducted in the fourth quarter of 2009 (companies with <10 employees).

Job Bank Analysis – This section provides a summary of jobs posted to the Job Bank in the fourth quarter of 2010.

Disclaimer

Alberta Employment and Immigration has made every effort to ensure that the information contained in this report is reliable, but makes no guarantee of its accuracy or completeness. The user of any information in this report accepts full responsibility and risk of loss resulting from decisions made by the user.



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EXECUTIVE SUMMARY The Economy Global Economy

The International Monetary Fund (IMF) expects world output to grow by 4.8 per cent in 2010 and by 4.2 per cent in 2011. The world economy is then forecast to grow on average 4.6 per cent annually from 2012 to 2015. However, the extent of the economic recovery differs significantly across regions, with emerging and developing countries – notably Asia— in the lead. These imbalances across regions now pose a risk to a sustainable economic growth.

• The output of emerging and developing countries is forecast to expand by 7.1 per cent in 2010 and by 6.4 per cent in 2011. In 2011, Chinaʼs economy is projected to grow by 9.6 per cent, while the Indian economy is expected to expand by 8.4 per cent.

• In advanced economies, growth is expected to be 2.7 per cent in 2010 and 2.2 per cent in 2011. In 2011, the economies of Canada, Germany, the United Kingdom, and the U.S. are forecast to grow between 2 – 3 per cent, while growth in France, Italy, Japan and Spain is expected to be less than 2 per cent.

U.S. Economy

More than a year into the economic recovery, the pace of overall growth in the U.S. economy remains fairly modest compared to the rates seen in previous economic recoveries. The latest data from the U.S. Bureau of Economic Analysis indicates that real gross domestic product (GDP) in the U.S. increased at an annual rate of 2.6 per cent in the third quarter of 2010, following a 1.7 per cent increase in the previous quarter.

• Real consumer spending remains weak at this stage of the U.S. economic recovery. One of the major drags on consumer spending is the weak labour market. For any improvement in consumer spending to occur, greater increases in hiring and labour income growth are required.

• The personal saving rate in the U.S. increased from a low of 1.8 per cent in 2007 to around 6 per cent in 2010, a level last seen in 1995. The International Monetary Fund (IMF) expects the personal saving rate to remain around 4 to 6 per cent through 2015. While these adjustments are good news for future spending, they could restrain spending in the near term. The Conference Board expects real consumer spending in the U.S. to increase by only 1.5 per cent in 2010 and rebound by 2.7 per cent in 2011.

• Given the depth of the recession and current developments, prospects for the U.S. economy indicate a long and slow recovery. Economic growth is also expected to be weaker compared to previous recoveries. The IMF projects the U.S. real GDP growth to be 2.6 per cent in 2010 and 2.3 per cent in 2011.

• December 2010 employment numbers showed that the U.S. economy created 1.1 million jobs, or an average of 94,000 per month, since December 2009. While employment increased by 103,000 month-over-month in December 2010, this pace of job creation is not sufficient for a sustainable recovery.

• The number of unemployed persons in the U.S. declined by 556,000 to 14.5 million in December 2010, bringing the unemployment rate to 9.4 per cent, down from 9.8 per cent in the previous month.

• Labour demand, as measured by the number of online advertised vacancies, declined by 9,400 in December 2010. The supply/demand rate (the gap between the number of unemployed persons and the number of online advertised vacancies) for the U.S. stood at 3.4 in November 2010, meaning there were more than three unemployed workers for every online advertised vacancy.



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• Privately-owned housing starts reached 555,000 in November 2010, up 3.9 per cent from a month earlier, but down 5.8 per cent year-over-year.

• New home sales in the U.S. totaled 290,000 in November 2010, up 5.5 per cent from the previous month, but down 21 per cent year over year.

• The median sales price of new homes sold in November 2010 was $213,000, while the average sales price was $268,700. There were 197,000 new houses for sale in the U.S. at the end of November 2010, representing a supply enough for the next 8.2 months at the current rate of sales.

Canadian Economy

The Canadian economy is now in a period of more modest growth, after being one of the first advanced economies to move out of the recession. While the second quarter 2010 GDP results already marked a significant downshift in real GDP growth, the release of third quarter 2010 GDP results showed a further deceleration in economic recovery. Real GDP in Canada expanded at an annualized rate of 1.0 per cent in the third quarter of 2010, following a 2.3 per cent increase in the second quarter.

• According to the International Monetary Fund (IMF), risks to Canadian economic growth over the next two years are mainly external. The Canadian economy will particularly be affected by the changes in commodity prices, notably mineral and energy prices, and a slowdown in the U.S. economy, which accounts for about three-quarters of Canadaʼs exports. Against this backdrop, Canadaʼs economy is expected to grow 2.5 per cent in 2011 and 2.9 per cent in 2012.

• Responses to the Bank of Canadaʼs Autumn Business Outlook Survey reveal that businesses continue to be optimistic about the economic outlook for the next 12 months. However, many firms are still expecting modest growth, with strong competition and moderate demand being cited as some of the challenges along the road to economic recovery.

• The Canadian dollar averaged 99 cents U.S. in the final quarter of 2010, up three cents from an average of 96 cents U.S. in the previous quarter. The value of the Canadian dollar is expected to reach parity as early as the first quarter of 2011. By the fourth quarter of 2011, the Canadian dollar is forecast to trade between 97 cents U.S. and 104 cents U.S., and trade between 96 cents U.S. and 106 cents U.S. by the fourth quarter of 2012.

• Inflation in Canada rose 2.0 per cent in the 12 months to November 2010, following an increase of 2.4 per cent in October 2010. Overall, inflation in Canada is expected to increase 1.8 per cent in 2010, and then sit around the 2 per cent mark for 2011 and 2012.

• The Bank of Canada left its overnight interest rate unchanged at 1.0 per cent on January 19, 2011 for a third consecutive meeting. RBC Financial Group is forecasting the Bank of Canada will raise its overnight rate to 1.5 per cent by the end of the second quarter of 2011 and to 2.0 per cent by the end of 2011.

• Canadaʼs population was estimated at 34,238,000 on October 1, 2010. During the third quarter of 2010, Canadaʼs population grew by 129,000 or 0.4 per cent from the second quarter of the year.

Alberta Economy

In line with expectations, the strong economic rebound that began in Alberta in the fall of 2009 and continued through 2010 has started to lose steam. While the post-recession recovery has been and is expected to be modest, the Alberta economy is on track for a full recovery by the middle of 2011. This strong performance is due to significant improvements in a number of areas, but particularly to a swift rebound in the energy sector and increased job creation since the second half of 2010.



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• Economic growth in Alberta is forecast to be 3.4 per cent in 2010. The strength of the goods-producing sector, driven by the expanding energy sector, is expected to push real GDP in Alberta up 4.3 per cent in 2011. As the recovery becomes more widespread, income growth and consumer spending are expected to solidify, boosting the services-producing sector. With the combination of strong services-producing and goods-producing sectors, real GDP in Alberta is expected to expand by 3.8 per cent in 2012.

• The price of West Texas Intermediate (WTI) crude oil averaged $85 U.S. per barrel in the final quarter of 2010, up 12 per cent from an average of $76 U.S. per barrel in the previous quarter. On an annual basis, the price of WTI crude oil averaged $79 U.S. per barrel in 2010, up approximately 30 per cent from an average of $62 U.S. per barrel in 2009. The Energy Information Administration (EIA) forecasts that WTI crude oil will average $93 U.S. per barrel in 2011 and $98 U.S. per barrel in 2012.

• During the third quarter of 2010, natural gas prices averaged $3.27 CAD per GJ, down 3 per cent from an average of $3.37 CAD per GJ in the previous quarter, but significantly up 20 per cent from an average of $2.71 CAD per GJ in the third quarter of 2009.

• For the first ten months of 2010, the number of active drilling rigs averaged 177 in Alberta, up 48 per cent from the same period of 2009. Rig utilization (the share of active drilling rigs in total rigs) from January to November 2010 was 32 per cent, up from a utilization rate of 20 per cent during the same period in 2009.

• As of November 2010, there were 895 major construction projects worth $193.2 billion that were either planned, underway, or recently completed in Alberta.

• Consumer prices in Alberta rose 0.1 per cent in the 12 months to November 2010 after rising 1.2 per cent in October.

• Year-to-date to the end of September 2010, a total of 19,084 housing units were started in Alberta. This level of activity represented a 70 per cent increase over the 11,199 units started during the same period in 2009.

• Year-to-date to the end of September 2010, Multiple Listing Service (MLS) sales in Alberta totaled 39,820 units, down 12 per cent from the same period in 2009. From January to September 2010, MLS resale price in Alberta averaged $354,165, posting a 4 per cent increase from the same period in 2009.

• In November 2010, the value of building permits issued in Alberta totaled $795 million, down 29 per cent from the previous month.

• Investment in non-residential building construction in Alberta totaled $2.2 billion in the fourth quarter of 2010, down 1.8 per cent from the previous quarter. On an annual basis, investment in non-residential building construction was also down 7 per cent, putting Alberta in first place in terms of largest year-over-year declines.

• In October 2010, retail sales in Alberta reached $5.0 billion, up 6 per cent from the same month of 2009. While, all provinces registered annual gains in October, Alberta posted the largest increase, a rate that was also well above the national rate of 3.3 per cent.

• Wholesale sales in Alberta totaled $5.3 billion in October 2010. While Octoberʼs sales were up 23 per cent year over year, sales were down 2.4 per cent from the previous month. Lower sales in the machinery, equipment and supplies and the miscellaneous sectors were the main drivers of the month over month decline in October.



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• Average weekly earnings of Albertaʼs payroll employees totaled $1,012.50 in October 2010. This represents a decline of 1.6 per cent from September, but an increase of 6.6 per cent year over year. Despite the month-over-month decline, average weekly earnings in Alberta were still the highest in the country.

• Consumer and business bankruptcies in Alberta totaled 724 in October 2010, down 5.5 per cent from the previous month, but up by a marginal 0.1 per cent from the same month in 2009.

• A total of 47,490 Albertans received regular Employment Insurance (EI) benefits in October 2010, down 0.9 per cent from the previous month and down 35 per cent year-over-year. On an annual basis, Alberta posted the largest decline in the number of regular EI beneficiaries across all provinces in October 2010.

• Albertaʼs population grew by 14,140 (+0.38 per cent) to 3,735,086 from July 1 2010, to October 1, 2010. This represents an increase of 51,643 persons from October 1, 2009 and a yearly growth rate of 1.4 per cent, the smallest year-over-year growth in Alberta since 1995.

Calgary Region Economy

Calgaryʼs economy is expected to expand by 3.5 per cent in 2010. As the economic recovery continues and job growth resumes, real GDP is forecast to post a 3.8 per cent rate of growth in 2011. According to Calgary Economic Development, a combination of moderate employment growth, labour income growth and increased consumer confidence will drive the economic growth in Calgary in 2011 and beyond.

• The Conference Board of Canada expects the Calgary economy to grow by 4.2 per cent annually from 2011 to 2014, placing Calgary first in terms of real GDP growth among 13 Census Metropolitan Areas (CMAs) included in its Metropolitan Outlook Report.

• All Canadian CMAs recorded year-over-year price increases in the Consumer Price Index (CPI) in November 2010, with the exception of the Calgary CMA, where consumer prices were essentially unchanged when compared to the same month of 2009. Inflation in the Calgary CMA is forecast to average 1.0 per cent in 2010, 1.9 per cent in 2011 and 2.4 per cent in 2012.

• Total housing starts in the Calgary CMA declined 33 per cent year-over-year to 555 units in November 2010, with both single-detached and multi-family starts contributing to the decline. Overall, Canada Mortgage and Housing Corporation is expecting total housing starts to reach 9,100 units in 2010, up 44 per cent from 2009. Housing activity in the Calgary CMA is then projected to moderate and total 8,900 units in 2011.

• The number of single-family homes sold in December 2010 in Calgary totaled 734, a decline of 18 per cent month-over-month. On an annual basis, the number of single-family homes sold in December was down 8 per cent compared to the same month of 2009. In contrast, the number of metro condos sold in Calgary in December increased to 320 units, up from the 310 metro condos sold in November 2010, but down six per cent year over year.

• The median price of a single-family home sold in Calgary in December was $389,000, posting a decline of 2.5 per cent from the previous month. Year-over-year, the median price of a single-family home in Calgary declined 3 per cent. The median price of a metro condo unit sold in Calgary in December was $258,000, reflecting an increase of 2 per cent from the previous month, but a decline of 2 per cent year-over-year.

• Rental vacancies in the Calgary CMA declined for the first time in October 2010 after three consecutive years of increases. The vacancy rate in the Calgary CMA was 3.6 per cent in October 2010, down from 5.3 per cent in 2009.



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• The average rent for a two-bedroom apartment suite in the Calgary CMA was $1,069/month in October 2010, down from $1,099/month in the same month of 2009. This was the second consecutive year in which the average rent for a two-bedroom apartment posted a year-over-year decline.

• In November 2010, Calgary builders took out $242.2 million in building permits, down 3 per cent from the previous month. While the value of residential permits increased 14 per cent from the previous month, this increase was not able to offset the declines registered in non-residential permits, which declined by 26 per cent month-over-month.

• Investment in non-residential building construction in the Calgary CMA totaled $875 million in the final quarter of 2010, down 7 per cent from the previous quarter. On an annual basis, non-residential construction investment in the fourth quarter was also down 14 per cent compared to the same quarter of 2009.

• Calgary has several office buildings that are currently in the construction phase. When two particular buildings (Eighth Avenue Place and The Bow) are completed, vacancy for the entire market is forecast to increase to 10.7 per cent by the end of 2011, from 9.8 per cent in the third quarter of 2010. As corporations continue to relocate as a result of new space becoming available, vacancy is expected to further increase in 2012.

• There were approximately 173 major projects worth $23.7 billion that were either proposed, announced or under construction in Calgary as of October 2010.

• Calgaryʼs population increased from 1,065,455 in April 2009 to 1,071,515 in April 2010. This represents an increase of 0.57 per cent from a year earlier, and marks the lowest percentage of growth experienced by Calgary since 1984 when the city experienced a decline in its population.

Trends in the Labour Market Canada

The Canadian labour market managed to gain some momentum throughout the fourth quarter of 2010, with employment increasing on a monthly basis by 3,000 in October, by 15,200 in November, and by 22,000 in December. Overall, employment in Canada rose on average by 28,000 in the fourth quarter of 2010 compared to the previous quarter, and by 354,000 (or 2.1 per cent) year over year.

• Canadaʼs unemployment rate averaged 7.7 per cent in the fourth quarter of 2010, down from 8.0 per cent the previous quarter and down from 8.4 per cent year over year.

• Full-time employment accounted for all of the employment gains in the fourth quarter of 2010 on a quarterly basis. Year over year, however, part-time employment rose by 4.1 per cent (or 130,700) compared to an increase of only 1.6 per cent (or 223,100) for full-time employment.

• Men accounted for over 70 per cent of the employment gains on both a quarterly basis (+19,800) and a yearly basis (+256,100) in the fourth quarter of 2010.

• Employment for those aged 55+ was up 1.6 per cent on a quarterly basis in the fourth quarter of 2010, and accounted for all of the employment increase in the quarter (+47,500). Offsetting this gain was a decline in youth employment (-15,500) and a decline in employment for those aged 25 – 54 (-3,900).

• Employment increased in nine industries quarter over quarter, with the largest gains (in numbers) occurring in transportation and warehousing (+29,900) and construction (+23,400).



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Alberta

Following a notable gain of 17,000 jobs in October 2010, Albertaʼs labour market lost its momentum in the final months of the year, with employment declining by 2,400 in November and by another 2,400 in December. Overall, employment in Alberta increased by 13,200 in the fourth quarter of 2010, compared to the previous quarter, averaging 2,018,800.

• Albertaʼs unemployment rate averaged 5.7 per cent in the fourth quarter of 2010, down from 6.3 per cent the previous quarter, and down from 7.0 per cent year over year.

• Full-time employment in Alberta accounted for almost all of the employment gain in the fourth quarter of 2010. Full-time employment was up 2.1 per cent year over year, while part-time employment was virtually unchanged.

• Men accounted for almost three-quarters of the employment increase in the fourth quarter of 2010, with employment for men increasing 2.3 per cent year over year, and employment for women increasing 1.1 per cent.

• Adults aged 25 – 64 accounted for 90 per cent of the employment gain in the fourth quarter of 2010. Youth employment, however, declined by close to 1,000 year over year. Employment for seniors aged 65+ increased by 4,600 or 8.1 per cent in the fourth quarter of 2010.

• Employment increased in 9 of 18 industries in Alberta year over year in the fourth quarter of 2010, with the most notable increases (in numbers) seen in mining and oil and gas (+22,000), construction (+17,700) and health care and social assistance (+17,000).

Calgary CMA

Employment in the Calgary CMA declined on both a quarterly (-6,000) and an annual basis (-9,900) in the fourth quarter of 2010, averaging 692,500.

• Calgaryʼs unemployment rate averaged 6.3 per cent in the fourth quarter of 2010, down from 6.7 per cent the previous quarter and down from 7.0 per cent year over year.

• Calgaryʼs participation rate, which is the percentage of the population 15 years+ that is either employed or actively looking for employment, fell below 74 per cent in November and December 2010. The last time Calgaryʼs participation rate was below 74 per cent was November 2005.

Calgary and Area Employer Survey For each quarter of 2010, a survey was conducted of Calgary and area companies. The purpose of the survey was to gather information from employers on their recruitment and retention practices and various other employment issues they are facing. In the first quarter of 2010, large-sized companies with 100 or more employees were surveyed and in the second quarter of 2010, medium-sized companies with 50 – 99 employees were surveyed and reported on. Companies with 10 – 49 employees were surveyed in the third quarter, and companies with less than 10 employees were surveyed in the fourth quarter.

Q4 2010 Survey Results: Micro-Sized Companies (<10 employees)

• The 207 companies surveyed employ approximately 842 people.

• For companies surveyed in Q4 2010, the same number of companies downsized as expanded in the year prior to their survey, a slight improvement from the Q4 2009 results.

• The balance of opinion on future business activity was less positive for companies surveyed in Q4 2010.



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• Six per cent of the companies surveyed in Q4 2010 reported they laid off workers in the three months prior to their survey, down from 18 per cent in Q4 2009.

• Fifteen per cent of the companies surveyed in Q4 2010 said they had vacant positions that needed to be filled at the time of their survey, compared to 13 per cent of the companies surveyed in Q4 2009.

• In Q4 2010, the companies reporting vacancies reported a total of 55 positions that needed to be filled, which was close to the 53 vacancies reported by companies the previous year. Overall, this equates to a vacancy rate of 6.5 per cent for Q4 2010.

• The balance of opinion on future employment was slightly less positive for companies surveyed in Q4 2010.

• Four per cent of the companies surveyed in Q4 2010 reported they employed 14 temporary foreign workers, unchanged from Q4 2009.

• Three per cent of the companies surveyed in Q4 2010 anticipated applying for or hiring approximately 10 temporary foreign workers in the 12 months following their survey, virtually unchanged from Q4 2009.

• Overall, the most commonly used recruitment method for companies surveyed in Q4 2010 was word of mouth/employee referrals, followed by walk-ins/unsolicited resumes, the Internet, company website/internal postings, and newspapers.

• Seventeen per cent of the companies surveyed in Q4 2010 reported having difficulty recruiting qualified employees in the 12 months prior to their survey, down slightly from Q4 2009 when 19 per cent reported having difficulty.

• On balance, the companies surveyed in Q4 2010 anticipated having about the same amount of difficulty recruiting qualified employees over the next 12 months.

• Twenty-eight per cent of the companies surveyed in Q4 2010 reported employees had left their company in the 12 months prior to their survey as a result of voluntary turnover, compared to 35 per cent of the companies in Q4 2009.

• The companies surveyed in Q4 2010 reported approximately 136 employees left their companies in the 12 months prior to their survey as a result of voluntary turnover. This equated to a turnover rate of 16.2 per cent.

• On balance, the companies surveyed in Q4 2010 anticipated employee turnover would be lower over the next 12 months.

• Overall, the most commonly used retention strategy for companies surveyed in Q4 2010 was a positive work environment, followed by interesting/challenging work, a competitive salary, and excellent communication.

• In Q4 2010, fewer companies on balance anticipated they would be focusing more on employee retention in the next year.

• Companies were asked what the single most important issue or challenge their company is currently facing. The economy was the top response, followed by attracting new customers/getting more work, competition, access to capital/financing/funding, and managing growth.



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Job Bank Analysis • For Calgary (city), there were 9,735 unique job postings on the Job Bank in the fourth quarter of 2010,

advertising for a total of 22,305 positions. Forty-two per cent were sales and service occupations, and 27 per cent were trades, transport and equipment operator occupations.

• For the communities surrounding Calgary, there were 1,756 unique job postings on the Job Bank in the fourth quarter of 2010, advertising for a total of 4,264 positions. Forty-five per cent were sales and service occupations, and 24 per cent were trades, transport and equipment operator occupations.

• For the Banff/Canmore area, there were 582 unique job postings on the Job Bank in the fourth quarter of 2010, advertising for a total of 1,455 positions. Sales and service occupations dominated the Job Bank in the fourth quarter of 2010 accounting for three-quarters of the total positions.

• Since July 21 2009, job postings for Calgary and surrounding area varied from a low of 1,240 postings the week of January 5, 2010 to a high of 2,753 postings the week of August 31, 2010. Job postings for Banff/Canmore area varied from a low of 71 postings the week of December 1, 2009 to a high of 251 postings the week of April 20, 2010.



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THE ECONOMY The Calgary regionʼs economy is affected by global economic activity, economic conditions in the U.S., and economic drivers in the Canadian economy and elsewhere in Alberta.

GLOBAL ECONOMY The world economic recovery, especially in emerging markets, has proven stronger than anticipated for the most part of 2010. This momentum is expected to carry forward through 2011 as well. However, better than forecasted performance of the world economy does not mean that there are now fewer risks on the road to a sustainable global economic recovery.

“This year has turned out to be a surprisingly good one for the world economy. Global output has probably risen by close to 5 per cent, well above its trend rate and a lot faster than forecasters were expecting 12 months ago. Most of the dangers that frightened financial markets during the year have failed to materialize. Chinaʼs economy has not suffered a hard landing. Americaʼs mid-year slowdown did not become a double-dip recession. Granted, the troubles of the euro areaʼs peripheral economies have proved all too real.”1

The question now is if the global economic recovery will follow the same pattern in 2011 that it followed in 2010. The International Monetary Fund (IMF) expects world output to grow by 4.8 per cent in 2010 and by 4.2 per cent in 2011, in line with earlier projections.2 The world economy is then forecast to grow on average 4.6 per cent annually from 2012 to 2015.

Figure 1: World Economic Outlook Projections

Average Projected Real GDP Growth for 2010-2011 (percent change)

1 The Economist, The World Economy, “Three-way split”, December 9, 2010. 2 International Monetary Fund, World Economic Outlook, October 2010, p.xv.



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However, the extent of the economic recovery differs significantly across regions, with emerging and developing countries – notably Asia— in the lead. These imbalances across regions now pose a risk to a sustainable economic growth.

Founded in 1999 after the Asian financial crisis, the Group of Twenty (G20) has become a key forum for addressing the worldʼs economic and financial challenges. The most recent G20 statement after the November 2010 submit in Seoul also signaled global imbalances as a top priority. The G20 leaders indicated that uneven growth and widening imbalances across regions and countries can lead to uncoordinated actions, which will only result in divergence from global solutions and “worse outcomes for all.” Also included in the statement was the “need to shift from public to private sources of demand, establish a pattern of growth across countries that is more sustainable and balanced, and reduce development imbalances.”

“The G-20 is the premier forum for our international economic development that promotes open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability. By contributing to the strengthening of the international financial architecture and providing opportunities for dialogue on national policies, international co-operation, and international financial institutions, the G-20 helps to support growth and development across the globe.”3

Although many emerging and developing countries are enjoying high growth rates again, they continue to rely significantly on demand from advanced economies. Those countries that rely heavily on demand for imports from the advanced countries therefore have to rebalance their growth toward domestic sources to be able to achieve growth rates that are similar to those achieved pre-crisis.

As discussed previously, two fundamental and difficult economic rebalancing acts, internal and external rebalancing, are needed to be able to achieve a balanced and sustained world economic recovery. First, internal rebalancing refers to strengthening of private demand for countries in which fiscal stimulus helped to alleviate the fall in output. Second, external rebalancing refers to shifting economic growth toward net exports for many advanced economies and to domestic demand for emerging economies. While internal rebalancing is slowly taking place, external rebalancing seems limited. According to the IMF, the following action items can help to improve the global economic recovery.4

• Wherever private demand is weak, central banks should continue with accommodative monetary policies.

• Wherever needed, governments must continue both financial repair and financial reform to support demand and growth.

• Governments must address fiscal consolidation and offer credible medium-term plans for debt stabilization and debt reduction.

Against this backdrop, the output of emerging and developing countries is forecast to expand by 7.1 per cent in 2010 and by 6.4 per cent in 2011. However, in advanced economies, growth is expected to be 2.7 per cent in 2010 and 2.2 per cent in 2011.5 Given the depth of the recession and the amount of excess capacity, these growth rates are considered to be very low and point to a very slow decline in unemployment rates.

3 http://www.g20.org/about_index.aspx 4 International Monetary Fund, World Economic Outlook, October 2010, p.xiii. 5 Ibid, p.1.



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Asian economies have entered the global recession on a strong footing, with economic growth surging in the first half of 2010. Economic growth is expected to be strong for 2010 as a whole and for 2011 as well. The growth in the Asian economies will be supported by fiscal stimulus programs, low levels of interest rates and a buildup of inventories.

Japan is the only country in the Asia-Pacific region where GDP is lower than its pre-recession peak.6 Japanʼs economy registered a decline of 1.5 per cent in the second quarter of 2010, following strong rates of economic growth in the previous two quarters. According to Deloitte Research, this slowdown was a sign of things to come for the Japanese economy.7 What caused the decline in real GDP was that consumer spending declined, exports slowed, and imports accelerated during this time.

“Japanʼs economy has been making a gradual recovery, but since this fall, the process has come to a stall, caused by a loss of momentum in three interrelated growth components: demand from emerging countries, policy-supported demand for automobiles and home appliances and demand for information-related goods. As a result, export and production growth have peaked, and with the yen gaining strength combined with falling stock prices, business sentiment and consumer confidence have somewhat declined.”8

However, the Japan Center for Economic Research indicated that an entry into recession will be prevented; as the current round of production adjustments will not last long and business investment and consumer spending will pick up gradually. While the strong yen has had a negative impact on economic growth so far, the effects of the exchange rate fluctuations are expected to gradually diminish in the long run. Real GDP in Japan is projected to expand by 2.8 per cent in 2010 and a further 1.5 per cent in 2011. However, this level of economic growth will still be below the potential output.

“In Japan, an export-led recovery since the second quarter of 2009 strengthened in early 2010, thanks to a stronger-than-anticipated recovery in the Western advanced economies and rising demand for capital goods from China. However, sporadic appreciation of the yen (for example, in May 2010, when financial volatility in Europe triggered safe haven inflows) and the recent cooling of the U.S. economy will continue to affect exports. Although investment activity is projected to pick up—sparked by export-oriented businesses—the unwinding of fiscal stimulus and the sluggish labor market are likely to weigh on near-term growth.”9

While still being one of best performers of the world economy, Chinaʼs growth has moderated somewhat in recent quarters. Real GDP growth in China slowed from 10.6 per cent in the first half 2010 to 9.6 per cent in the third quarter of 2010. Earlier in the year, the Chinese government had started the process of tightening monetary policy in order to slow growth and defuse inflationary pressures. Consumer prices increased 3.6 per cent year-over-year in September 2010, driven mainly by higher food prices.

6 Conference Board of Canada, Economic Research, World Outlook Autumn 2010, p.9. 7 Deloitte, Global Economic Outlook 4th Quarter 2010, October 26, 2010, p.25. 8 Japan Centre for Economic Research, Short-Term Forecast for the Japanese Economy (2010/10-12—2013/1-3),

November 2010, p.1. 9 International Monetary Fund, World Economic Outlook, October 2010, p.64.



15

“As 2011 begins, it is clear that China is in a new phase of its economic development. Gone are the days when growth stemmed largely from the export of simple, labor-intensive manufactures. Gone are the days when global companies looked to China principally for its cheap labor. Gone too are the days when the US consumer was the engine of global growth and, in particular, the key to Chinaʼs export growth.”10

So far, the moderation in Chinese economic growth has been largely driven by domestic factors. Investment continued to slow gradually through the third quarter of 2010, while consumer spending also softened, especially in urban areas. Looking forward, slower international growth is likely to affect Chinaʼs growth. Inflation is expected to remain above the 3 per cent target for the near-term. Overall, Chinaʼs real GDP is expected to expand by 10.5 per cent in 2010 and by 9.6 per cent in 2011.

“Chinaʼs favorable growth outlook warrants further normalization of the macroeconomic stance. After the large stimulus, the key macroeconomic concerns remain asset price increases, strained local government finances, and NPLs [non-performing loans]. While the inflation outlook does not seem worrisome, the upward risks call for vigilance and managing inflation expectations. Notwithstanding the slack and unemployment in many high income countries, Chinaʼs economy is operating close to full capacity and the growth outlook is favorable. Thus, further consolidation of the overall macroeconomic stance is needed to contain these risks.”11

Indiaʼs economic performance in 2010 shows that the recovery from the global economic crisis is well underway. The sharp and broad-based recovery of the Indian economy, which started in the second half of 2010, continued through the rest of the year and into early 2011. Following a severe Southwest monsoon last year (2009), abundant rainfall this year is expected to boost the agriculture sector, which accounts for a quarter of the Indianʼs GDP.

Despite the normal monsoon season, food prices are still high in India, with the increase in food prices hovering around the 15 per cent mark in September 2010. According to the Reserve Bank of India, high food prices can be attributed to a change in the consumption pattern of consumers, which favors protein-rich items such as eggs, milk, fish and meat where price increases have been high. Elevated inflation remains a challenge for monetary policy.

“Anchoring inflation expectations in such an environment is a difficult challenge for monetary policy. While moderating momentum of the nonfood manufactured inflation suggests that recent monetary actions are having an impact, inflation still remains above the comfort level. Going forward, the growth inflation outlook will dominate the policy response, and the nature and timing of monetary policy actions would have to be conditioned by their expected effectiveness in attaining the intended goal.”12

Overall, Indiaʼs economy is projected to expand by 9.7 per cent in 2010 and by 8.4 per cent in 2011. As one of the countries that has been compared to China in so many ways, like population and economic growth, India is now expected to replace China in terms of economic growth and become one of the worldʼs biggest economies.

10 Deloitte Research, Asia Pacific Economic Outlook: China, India, Taiwan, Vietnam, January 2011, p.2. 11 World Bank, China Quarterly Update, November 2010, p.13. 12 Reserve Bank of India, Macroeconomic and Monetary Developments, November 1, 2010.



16

Table 1: Emerging and Developing Economies Outlook Projections (Percent Change)

2010 2011 2012 2010 2011 2012

China 10.5% 9.6% 9.5% 3.5% 2.7% 2.0%

India 9.7% 8.4% 7.9% 13.2% 6.7% 4.7%

Brazil 7.5% 4.1% 2.1% 4.9% 4.6% 4.6%

Mexico 5.0% 3.9% 5.0% 4.2% 3.2% 3.0%

Inflation

Source: International Monetary Fund, World Economic Outlook Database, October 2010.

* Actual or most recent estimates.

RegionReal GDP

Strong domestic and external demand is fuelling economic growth in many of the economies in Latin America and the Caribbean (LAC). Reflecting solid macroeconomic policy fundamentals, sizable policy support and strong commodity revenues, the LAC region is recovering from the global economic crisis at a faster pace than anticipated. However, countries with close ties to the U.S. economy, such as Mexico, and countries that rely heavily on tourism and remittance flows from the U.S., will be more vulnerable to external conditions than other economies in the region.

“The current global setting is stimulative for those LAC economies with greater real linkages to the more dynamic emerging economies, and for those likely to be most attractive to foreign investors. Most commodity-exporting countries of South America are facing highly favorable conditions—particularly those with stronger fundamentals, who have easiest access to external financing and stand to benefit the most from low global interest rates. On the other hand, the environment is least favorable for those with strong real linkages to the weaker-performing advanced economies. This is the situation for many countries in Central America, with close ties to the U.S. economy in terms of income from exports and workersʼ remittances, and much more so for the tourism-dependent economies of the Caribbean.”13

After an impressive economic recovery registered during the first half of 2010, economic growth in the LAC region is projected to moderate for the rest of the year, and close 2010 with growth of 5.5 per cent. This represents an upward revision of about 1.5 percentage points from the IMFʼs May 2010 Regional Economic Outlook. Going forward, growth in the LAC region is projected to be 4 per cent in 2011, as output gaps close in most countries in the region. This level of economic growth also represents a tightening in fiscal policy.

“The fact that most of Latin America, with the exception of Venezuela, managed to emerge from the global recession in good shape is positive news for this part of the world as it begins to mark the bicentenary of the beginning of its fight for political independence. In fact, from 2004 to 2008, Latin America experienced its best years since the 1960s as GDP growth averaged 5.5 per cent per year and inflation remained under control in most countries in the region. Even more encouraging is the fact that a part of the world that used to stumble from one financial crisis to another managed to avoid the debacle that enveloped banks in the major developed countries in 2008–09.”14

13 International Monetary Fund, Regional Economic Outlook, Western Hemisphere Heating Up in the south, Cooler in

the North, November 2010, p.ix. 14 Conference Board of Canada, Economic Research, World Outlook Autumn 2010, p.6.



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However, economic growth is expected to vary significantly across countries within the region, reflecting different economic fundamentals such as external linkages, trade openness and economic diversification. Argentinaʼs economy is expected to expand by more than 7 per cent in 2011, constrained by the decline in oil and gas reserves. Economic growth in Brazil is expected to remain at 4 per cent in 2011, reflecting fading government stimulus measures. Following a 6.5 per cent contraction in 2009, real GDP in Mexico is expected to increase 5 per cent in 2010, supported by a rebound in the U.S. manufacturing industry. According to the Conference Board of Canada, “while sectors of the Mexican economy more dependent on domestic demand are lagging the recovery, such as agriculture, forestry, and fishing, they are expected to pick up steam next year in line with better employment prospects in the Mexican economy.”15

Table 2: Advanced Economies Outlook Projections (Percent Change)

2010 2011 2012 2010 2011 2012 2010 2011 2012

Canada 3.1% 2.7% 2.7% 1.8% 2.2% 2.0% 7.9% 7.5% 7.0%

France 1.6% 1.6% 1.8% 1.6% 1.6% 1.7% 9.8% 9.8% 9.4%

Germany 3.3% 2.0% 2.0% 1.3% 1.6% 1.4% 7.1% 7.1% 7.0%

Italy 1.0% 1.0% 1.4% 1.6% 1.7% 1.8% 8.7% 8.6% 8.3%

Japan 2.8% 1.5% 2.0% -0.9% -0.3% 0.2% 5.1% 5.0% 4.7%

Spain -0.3% 0.7% 1.8% 1.5% 1.1% 1.3% 19.9% 19.3% 18.0%

United Kingdom 1.7% 2.0% 2.3% 3.1% 2.5% 1.7% 7.9% 7.4% 6.5%

United States 2.6% 2.3% 3.0% 1.4% 1.0% 1.4% 9.7% 9.6% 8.8%

Unemployment Rate

Source: International Monetary Fund, World Economic Outlook Database, October 2010.

Real GDP InflationRegion

Due to sovereign debt crisis and unsustainable policies in some member countries, the road to recovery in Europe has been bumpy. However, most countries recorded better than anticipated growth rates in the first half of 2010, supported by the solid growth in Germany, the regionʼs largest economy. Real GDP in Germany expanded by 2.2 per cent quarter-over-quarter in the second quarter of 2010, which in turn positively affected countries with close ties to Germany such as Austria and the Netherlands. Overall, real GDP in the Euro Area is expected to increase by 1.7 per cent in 2010 and by 1.5 per cent in 2011. Consequently, the unemployment rate is expected to stay at 9.7 per cent in 2010 and slowly decline to 9.6 per cent in 2011.

“Further out, a number of forces are set to shape growth prospects. Whereas the projected softening of the global environment and fiscal consolidation are expected to have a dampening effect, especially next year, further improvements in financial-market conditions and the broadening out of the recovery are expected to support activity in 2011 and 2012. Indeed, with private demand gradually strengthening over the forecast horizon, the recovery is set to become increasingly self-sustaining. Developments across Member States remain uneven however, more so than in the spring, with the recovery advancing at a relatively fast pace in some, but lagging behind in others. This reflects differences in the scale of adjustment challenges across economies and ongoing rebalancing within the EU and euro area.”16

15 Conference Board of Canada, Economic Research, World Outlook Autumn 2010, p.5. 16 European Commission, Economic and Financial Affairs, European Economic Forecast Autumn 2010, November 29,

2010, p.7.



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U.S. ECONOMY More than a year into the economic recovery, the pace of overall growth in the U.S. economy remains fairly modest compared to the rates seen in previous economic recoveries. The latest data from the U.S. Bureau of Economic Analysis indicates that real GDP in the U.S. increased at an annual rate of 2.6 per cent in the third quarter of 2010, following a 1.7 per cent increase in the previous quarter. The third quarter growth was mainly driven by the gains in personal consumption expenditures, private inventory investment17, non-residential fixed investment, exports and federal government spending. These were partly offset by declines in imports and residential fixed investment.

“Since reaching a trough in the second quarter of 2009, the U.S. economy has grown at an annual average rate of 2.9 per cent. It is worth remembering that in normal times, 2.9 per cent annual growth is a healthy showing for a developed economy. But these are not normal times. In the wake of the deepest recession since the Great Depression, 2.9 per cent growth doesnʼt feel like much growth at all.”18

Figure 2: U.S. Real Gross Domestic Product (% change from preceding period)

Source: U.S. Bureau of Economic Analysis, National Income and Products Account Table

As the impacts of the fiscal stimulus started to fade, weaker growth was expected in the second half of 2010. However, what many forecasting agencies did not anticipate at that time was the impact that the European debt crisis would have on putting a further drag on the U.S. economic recovery. Many firms put their investment and hiring plans on hold and many households lowered their spending as a result of the

17 Private inventory investment is defined as the change in the physical stock of held by businesses and is used to

measure output derived from current production. 18 TD Bank Financial Group, Quarterly Economic Forecast, Stimulus Boosts Growth in 2011, But No Quick Fixes for

U.S. Economy, December 15, 2010, p.1.



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uncertainty created by high levels of debt in some European economies, in particular Greece, Spain and Portugal. In response to these developments and weaker growth, the Federal Reserve (Fed) entered a second round of ʻquantitative easingʼ19 and announced on November 3, 2010 that it would purchase $600 billion in Treasury securities between November 2010 and June 2011.

“On November 3, 2010, the Federal Open Market Committee (FOMC) decided to expand the Federal Reserveʼs holdings of securities in the System Open Market Account (SOMA) to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.”20

The impacts of the second quantitative easing on the markets actually came prior to the official announcement, when the possibility of additional easing was raised at the Fedʼs meeting in August 2010. By being able to change the trajectory of inflation expectations, the Fed had some room to lower the interest rates when it announced the second round of quantitative easing in November. TD Economics estimates that the impact of a second round of quantitative easing will help to lift U.S. economic growth by around 0.3 percentage points in 2011.21

Another equally important development for the U.S. economic recovery was the improvement of credit constraints, especially for small and medium-sized businesses. The results of the October 2010 Federal Reserve Senior Loan Officer Survey22 showed easing credit standards for both small and large banks in the final quarter of 2010. The net percentage23 of respondents reporting tighter credit conditions for small businesses fell to -7.1 per cent in the fourth quarter of 2010, down from 16.1 per cent in the fourth quarter of 2009 and from a record high of 74.5 per cent in the fourth quarter of 2008.24

“Domestic survey respondents reported easing standards and most terms on C&I [commercial and industrial] loans to firms of all sizes. As in the April and July surveys, banks mainly pointed to a more favorable or less uncertain economic outlook and increased competition from other banks or non-bank lenders as reasons for easing. Of the few banks that reported having tightened standards or terms, all reported a reduced tolerance for risk as being partly responsible for the tightening.”25

Real consumer spending remains weak at this stage of the U.S. economic recovery. One of the major drags on consumer spending is the weak labour market. For any improvement in consumer spending to occur, greater increases in hiring and labour income growth is required. So far in the recovery, households have been trying to rebuild balance sheets. The personal saving rate increased from a low of 1.8 per cent in 2007 to around 6 per cent in 2010, a level last seen in 1995. The International Monetary Fund (IMF) expects the personal saving rate to remain around 4 to 6 per cent through 2015. While these adjustments are good news

19 Quantitative easing is an unconventional monetary policy used by some central banks to stimulate their economy.

The central bank creates money, which it uses to buy government bonds and other financial assets, in order to increase the money supply and the excess reserves of the banking system; this also raises the prices of the financial assets bought (which lowers their yield). http://en.wikipedia.org/wiki/Quantitative_easing

20 Federal Reserve Bank of New York, Statement regarding Purchases of Treasury Securities, November 3, 2010. 21 TD Bank Financial Group, Quarterly Economic Forecast, Stimulus Boosts Growth in 2011, But No Quick Fixes for

U.S. Economy, December 15, 2010, p.3. 22 The Federal Reserveʼs Senior Loan Officer Survey (SLOS), is a survey of approximately 60 large domestic banks and

24 U.S. branches and agencies of foreign banks. The October 2010 survey was based on responses from 57 domestic banks and 22 U.S. branches and agencies of foreign banks between October 5 and 19, 2010.

23 The net percentage is defined as the percentage of banks that reported tightening standards (“tightened considerably” or “tightened somewhat”) minus the percentage of banks that reported easing standards (“eased considerably” or “eased somewhat”).

24 The Federal Reserve Board, Senior Loan Officer Survey on Bank Lending Practices, October 2010. 25 Ibid.



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for future spending, they could restrain spending in the near term. The Conference Board expects real consumer spending in the U.S. to increase by only 1.5 per cent in 2010 and rebound by 2.7 per cent in 2011.

The Conference Board Leading Economic Index (LEI) —a composite index of 10 major economic indicators— for the U.S. increased 1.1 per cent in November 2010, following a 0.4 per cent increase in October 2010, and a 0.6 per cent increase in September 2010. Novemberʼs increase marks the fifth consecutive gain and indicates that the economic recovery is gaining momentum and spreading. Nearly all components that comprise the LEI rose in November, with largest positive contributions coming from the interest rate spread, average weekly initial claims for unemployment insurance and real money supply. The only negative contributor came from a decline in building permits.

“The U.S. economy is showing some sparks of life in late 2010. Overall, the indicators point to a mild pickup after a slow winter. Looking further out, possible clouds on the medium term horizon include weaknesses in housing and employment.”26

The six-month change in the LEI for the U.S. has also picked up recently to 2.2 per cent in the period through November 2010. However, it still remains slow compared to the increase of 4.4 per cent for the previous six months. Nevertheless, it is on an upward trend and the strengths among the leading components have grown more widespread and have slightly exceeded the weaknesses over the past six months. According to the Conference Board, “all in all, the current behavior of the composite indexes and their components suggest that the economic expansion that began in mid-2009 will continue, and could even pick up slightly in the near term.”27

Given the depth of the recession and current developments, prospects for the U.S. economy indicate a long and slow recovery. Economic growth is also expected to be weaker compared to previous recoveries. The International Monetary Fund (IMF) projects the U.S. real GDP growth to be 2.6 per cent in 2010 and 2.3 per cent in 2011. This represents a downward revision of 0.6 percentage points from the July World Economic Outlook (WEO) Update for both years. While TD Economics is expecting a growth rate that is similar to the IMF projections for 2010, TD is more optimistic for the year ahead, projecting growth of 3.1 per cent for the U.S. economy in 2011. However, it is important to note that even with growth of over 3.0 per cent, the unemployment rate is expected to remain above 9 per cent over the near term.

“While downside risks to the forecast remain, as we move further away from the financial crisis, upside risks to growth are also emerging. In particular, given the accommodative nature of monetary, and (at least over the short term) fiscal policy, the level of excess supply still available means that resolution of one or more of the outstanding issues holding back economic growth could lead growth to rocket. The U.S. economy is certainly moving along the road to recovery, but the path is a long one and, as before, fraught with perils.”28

26 The Conference Board, News Release, The Conference Board Leading Economic Index (LEI) for the U.S. increases,

December 17, 2010. 27 Ibid. 28 TD Bank Financial Group, Quarterly Economic Forecast, Stimulus Boosts Growth in 2011, But No Quick Fixes for

U.S. Economy, December 15, 2010, p.5.



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Table 3: U.S. Economic Outlook (% change, period-over-period annualized)

Category Q1* Q2* Q3* Q4 Q1 Q2 Q3 Q4 2010 2011 2012

Real GDP 3.7 1.7 2.5 2.9 3.2 3.7 3.3 3.0 2.8 3.1 2.9

Consumer Expenditure 1.9 2.2 2.8 3.3 2.9 3.1 2.8 2.7 1.8 2.9 2.6

Business Investment 7.8 17.2 10.3 2.2 12.4 17.8 14.7 11.6 5.4 11.7 10.4

Personal Disposable Income 3.4 5.6 1.9 3.4 4.4 4.6 4.5 0.5 3.1 4.0 3.7

Housing Starts (million units) 0.6 0.6 0.6 0.5 0.6 0.6 0.6 0.7 0.6 0.6 0.7

Exports 11.4 9.1 6.3 10.3 8.6 7.2 6.8 6.1 11.8 8.0 6.9

Imports 11.2 33.5 16.8 -0.3 6.5 7.5 7.1 6.8 13.6 8.1 6.5

Employment 0.2 2.2 -0.2 0.7 1.7 2.5 2.2 2.1 -0.5 1.5 2.0

Unemployment Rate (%) 9.7 9.7 9.6 9.7 9.6 9.4 9.2 9.1 9..7 9.3 8.8

Personal Saving Rate (%) 5.5 6.2 5.8 5.8 5.9 6.0 6.2 6.2 5.8 6.1 5.6

Consumer Price Index (Y/Y) 2.4 1.8 1.2 1.1 1.0 1.6 1.7 1.6 1.6 1.5 1.8

* Actual data or most recent estimates.

Annual2010

Source: TD Economics, Qaurterly Economic Forecast, December 15, 2010

2011

One major discouraging elements of the U.S. economy is that the labour market is still not recovering at a pace that is enough to absorb the millions of people who lost their jobs during the recession. December 2010 employment numbers showed that the U.S. economy created 1.1 million jobs, or an average of 94,000 per month, since December 2009. While non-farm payroll employment increased by 103,000 month-over-month in December 2010, this pace of job creation is not sufficient for a sustainable recovery. According to a recent report by TD Economics, “if Decemberʼs (employment growth) pace were sustained, it would take until 2016 for employment to return to pre-recession levels”.29

Employment in the services-producing sector expanded by 115,000 in December 2010, while employment in the goods-producing sector fell marginally by 2,000. The main drivers of the employment gains in the services-producing sector were a 47,000 increase in leisure and hospitability and a 44,000 increase in health care. Employment in other industries generally showed little or no change in December.

The number of unemployed persons in the U.S. declined by 556,000 to 14.5 million in December 2010, bringing the unemployment rate to 9.4 per cent, down from 9.8 per cent in the previous month. This decline in the unemployment rate was the largest month-over-month drop since April 1998. However, Decemberʼs drop could be misleading in that the decline was not only a result of more people finding jobs, but also a result of 260,000 leaving the labour force, and hence not counted as unemployed but rather non-participants in the labour force. According to the U.S. Bureau of Labour Statistics, there were 1.3 million discouraged workers in December, an increase of 389,000 from a year ago.

That said, there are a number of positive developments that signal a better year for the U.S. labour market in 2011. The stronger economic growth anticipated for 2011 combined with a slowdown in productivity means that firms will start hiring to meet the increased demand.

“Companies have ruthlessly cut back on hiring, to the point where any increase in demand in the months ahead must surely lead to renewed hiring. The increased private sector hiring that began in January, while tepid, indicates that we wonʼt see the kind of jobless economic recovery that we experienced after the 2001 recession.”30

29 TD Economics, Employment Growth Disappoints Once Again, January 7, 2010. 30 The Conference Board of Canada, Economic Forecast, U.S. Outlook Autumn 2010, July 2010, p.9.



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As well, initial jobless claims have been on a downward trend and job openings as counted by the Job Openings and Labour Turnover Survey (JOLTS) are steadily rising. U.S. jobless claims rose by 18,000 to a seasonally adjusted 409,000 in the week ending January 1, 2011. The jobless claims fell to 391,000 in the previous week, the lowest since July 2008. The four-week jobless claims average also fell to 410,750 in the week ending January 1, 2011, posting a decline of 3,500 from the previous week and the lowest level since late July 2008. Against this backdrop, the U.S. economy is expected to create close to 2.7 million jobs in 2011, which should bring the unemployment rate down to 9.1 per cent by the end of the year.31

“Even with the gains, the number of people applying for benefits was fewer than 425,000 — a threshold that signals modest job growth. And applications are far below their peak during the recession of 651,000, reached in March 2009.”32

The unemployment rate and the employment-population ratio are the two most commonly used indicators of labour market performance. Comparing the changes in these indicators with earlier recessions indicate the relative severity of the current recession in the U.S. labour market. According to the U.S. Bureau of Labour Statistics, “the unemployment rate increased more sharply and the employment-population ratio decreased more precipitously during the 2007-09 recession than in any of the other post WWII recessions.”

A recent report by the U.S. Bureau of Labour Statistics compares the current recession with the ones that occurred in the late 1970s, in the early 1980s, in 1990-91 and in 2001. The unemployment rate increased in each of those five recessions, but the current recession stands out as having the largest increase. The current recession saw the unemployment rate increase from 5.0 per cent at the start of recession to 9.5 per cent at the trough of the recession. The rate peaked at 10.1 per cent in October 2009, four months after the end of recession. By December 2010, the unemployment stands at 9.4 per cent, not showing much net improvement from the peak in October 2009. The largest change in the unemployment rate from start to peak was also registered in the current recession (+5.1 percentage points change). That was followed by the 1973-75 recession (+4.2 percentage points) and the 1981-82 recession (+3.6 percentage points).

The study also shows that the unemployment rate followed a similar upward trend for the first eight months of all the past recessions, and increased by an additional 3.0 percentage points or so during the next eight months of the recessions. However, in the current recession, the unemployment rate continued to move upward for several months after 16 months, a trend that was not seen in the previous recessions.

Table 4: Change in Unemployment Rate From Start of Recession to Post-recession Peak

Recession Period

Length of Recession (months)

Unemployment rate at the start of

recession

Unemployment rate at the end of

recession

Month of peak unemployment

rate

Peak unemployment

rate

Change in unemployment rate from start to peak

Nov 1973 — Mar 1975 16 4.8 8.6 May 1975 9.0 4.2

Jul 1981 — Nov 1982 16 7.2 10.8 Dec 1982 10.8 3.6

Jul 1990 — Mar 1991 8 5.5 6.8 Jun 1992 7.8 2.3

Mar 2001 — Nov 2001 8 4.3 5.5 Jun 2003 6.3 2.0

Dec 2007 — Jun 2009 18 5.0 9.5 Oct 2009 10.1 5.1

Source: U.S. Bureau of Labour Statistics, Issues in Labour Statistics, December 2010

31 TD Economics, Employment Growth Disappoints Once Again, January 7, 2010. 32 The Global and Mail, U.S. jobless claims rise, but optimism persists, January 6, 2011.



23

As the labour market deteriorates in a recession, many businesses are forced to freeze hiring or decrease the number of employees, making it harder for job seekers to find a new job. According to the U.S. Bureau of Labour Statistics, unemployment levels were already signaling an economic downturn when the recession officially began in December 2007. The job openings data experienced a downward trend while unemployment levels increased since the start of the recession. The job openings dropped by over 50 per cent, from a high of 4.8 million in June 2007 to 2.3 million in July 2009. Unemployment levels increased from a low of 6.7 million in March 2007 to 15.6 million in October 2009. As of November 2010, the job openings level stands at 3.3 million and unemployment levels stands at 14.5 million.

Combining these two indicators, total job openings and unemployment levels, provides a measure of the number of unemployed persons per job opening and how this measure changes over time. The ratio of unemployed persons per job opening increased dramatically from 1.6 in September 2007 to 6.3 in July 2009. The number of unemployed persons per job opening has been fluctuating since July 2009 and stands at 4.6 as of November 2010.

There was also an increase in this ratio during the 2001 recession. During this previous recession, the ratio of unemployed persons to job openings increased from 1.2 per cent in March 2001 and peaked at 2.8 per cent in 2003, long after the recession officially ended. The ratio started declining again in 2003 and ranged between 1.4 and 1.6 unemployed persons per job opening for the most part of 2005 and 2006.

Figure 3: The U.S. Ratio of Unemployment Levels to Job Openings

Source: U.S. Bureau of Labour Statistics, Labour Force Statistics from the Current Population Survey, Job Openings and Labour

Turnover Survey



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The Conference Board Help Wanted OnLine (HWOL) Data Series also serves as an indicator of labour demand, as measured by the number of online advertised vacancies. Labour demand declined by 9,400 in December 2010.33 The supply/demand rate (the gap between the number of unemployed persons and the number of online advertised vacancies) for the U.S. stood at 3.4 in November 2010. This indicates that there were more than three unemployed workers for every online advertised vacancy. Regionally, the number of advertised vacancies was greater than the number of unemployed only in North Dakota, where the supply/demand ratio was 0.9 in November. In contrast, Mississippi (6.1) and Michigan (5.8) posted the highest supply/demand ratios, where there are around six unemployed persons for each online advertised vacancy. Although Michiganʼs supply/demand ratio was one the highest rates across the country, it has come down significantly from the peak of 10.2 in July 2009.

“The year 2010 ended with a continuation of the lackluster labor demand we have seen throughout the last half of this year. The strongest job demand was in the first quarter of the year, but the rest of the year failed to show that employers were significantly ramping up hiring across the economy.”34

The Conference Board Consumer Confidence Index,35 which had increased in November 2010, declined slightly in December 2010. The index stood at 52.5, down from 54.3 in the previous month. Consumers were a little more pessimistic about the present-day conditions compared to the previous month. Those indicating that business conditions are “bad” declined to 41.2 per cent in December 2010, from 42.9 per cent in November, while those claiming business conditions are “good” decreased to 7.5 per cent from 8.5 per cent over the same period. Consumersʼ appraisal of the labour market was also less favorable compared to a month earlier. The percentage of consumers indicating that jobs are “plentiful” declined to 3.9 per cent from 4.3 per cent. In contrast those claiming jobs are “hard to get” edged up to 46.8 per cent, up from, 46.3 per cent.

"Despite this month's modest decline, consumer confidence is no worse off today than it was a year ago. Consumers' assessment of the current state of the economy and labor market remains tepid, and their outlook remains cautious. Thus, all signs continue to suggest that the economic expansion will continue well into 2011, but that the pace of growth will remain moderate."36

The percentage of consumers expecting an improvement in business conditions in the next six months increased slightly to 16.6 per cent, from 16.4 per cent, while those expecting business conditions will worsen declined to 12.1 per cent, down from 12.4 per cent in the previous month. On the future job prospects front, consumers anticipating fewer jobs in the near term edged up to 19.5 per cent, while those expecting more jobs declined to 14.3 per cent in December 2010. According to the Conference Board, the proportion of consumers expecting an increase in their incomes also declined to 9.9 per cent from 11.1 per cent.

33 The Conference Board, News Release, Online Job Demand Essentially Unchanged in December, The Conference

Board Reports, January 5, 2011, p.1. 34 Ibid. 35 The Conference Board Consumer Confidence Index is based on a representative sample of 5,000 U.S. households. 36 The Conference Board, Consumer Confidence Survey, December 28, 2010.



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Recent data on new and existing home sales also signal that the housing market might be stuck in neutral. According to the Conference Board of Canada, on the demand side, weak job growth, tight credit conditions and low levels of consumer spending are some of the obstacles to a housing market recovery. On the supply side, the large stock of foreclosed homes is an obstacle.

“Also, many potential home buyers who would like to upgrade are being held back by the fact that the value of their existing property is less than the value of the mortgage. In the present economic environment, low home prices and mortgage rates are not enough of an incentive to overcome all the other fears that are keeping potential home buyers on the sidelines.”

Privately-owned housing starts reached 555,000 in November 2010, up 3.9 per cent from a month earlier, but down 5.8 per cent year-over-year. The month-over-month increase in starts was mainly driven by the gains in single-family construction, while multi-family starts showed a declined in November. Single-family housing starts increased to 465,000 in November, up 6.9 per cent from a month earlier.

In contrast, building permits, an indicator of future housing activity, were at a seasonally adjusted annual rate of 530,000 in November 2010, down 4.0 per cent from Octoberʼs rate of 552,000 permits. This was the lowest rate since April 2009.

“Given the supply-demand balance in the housing market, it is not surprising that starts are stuck in the doldrums. At the current sales rate, ordinary listings can supply more than 10 months worth of activity. Adding to this pressure is the 11 months worth of supply sitting in foreclosure or more than 90 days past due. In 2011 and 2012, stronger job and income growth coupled with ongoing thawing in mortgage lending will support an uptick in existing sales, which will support some modest growth in housing starts. That being said, housing construction will remain well below its long-run trend of 1.5 million starts annually until at least 2013 – a reminder that the housing recovery will be measured in years, not months or quarters.”37

New home sales in the U.S. were at a seasonally adjusted annual rate of 290,000 in November 2010. This level of activity was 5.5 per cent above the Octoberʼs rate of 275,000, but 21 per cent below the November 2009 estimate of 368,000. Existing home sales also increased by 5.6 per cent to 4.68 million in November 2010. Single-family sales increased 6.7 per cent compared to the previous month and accounted for approximately 90 per cent of total home sales.

The median sales price of new houses sold in November 2010 was $213,000, while the average sales price was $268,700. There were 197,000 new houses for sale at the end of November, representing a supply enough for the next 8.2 months at the current rate of sales.

“Novemberʼs bounce in existing home sales, although positive, fell short of market expectations. As such, it is an unsolicited reminder that the payback period for the joy of the boom years will remain unpleasantly drawn out. Sales are still below levels seen in the spring. All told, even though we continue to observe progress in the U.S. housing market, it will continue to occur in short steps. This means housing will remain a constraining factor to a stronger overall economic uptake for several quarters, given the impact of real estate prices on householdsʼ balance sheets and the role of construction and related activities as economic engines.”38

37 TD Economics, U.S. Housing Starts and Building Permits, December 16, 2010. 38 TD Economics, U.S. Existing Home Sales, December 22, 2010.



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Figure 4: U.S. Housing Starts and New Home Sales, Seasonally Adjusted Annual Rate

(thousands of housing units)

Source: U.S. Census Bureau, New Residential Construction and New Residential Sales



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CANADIAN ECONOMY As the economic recovery matured and a number of headwinds started to impact the economy, the strong rebound that occurred in Canada over the second half of 2009 and this year has began to lose steam. After being one of the first advanced economies to move out of the recession, the Canadian economy is now in a period of more modest growth. While the second quarter 2010 GDP results already marked a significant downshift in real GDP growth, the release of third quarter 2010 GDP results showed a further deceleration in economic recovery. Real GDP in Canada expanded at an annualized rate of 1.0 per cent in the third quarter of 2010, following a 2.3 per cent increase in the second quarter.39 This rate of economic growth was slightly lower than what the Bank of Canada had expected in the October Monetary Policy Report, and compared to the 2.5 per cent third quarter growth recorded in the U.S. economy.

“The recovery in Canada is proceeding broadly as anticipated, with a period of more modest growth and the beginning of the expected rebalancing of demand. The contribution of government spending is expected to wind down this year, consistent with announced fiscal plans. Stretched household balance sheets are expected to restrain the pace of consumption growth and residential investment. In contrast, business investment will likely continue to rebound strongly, owing to stimulative financial conditions and competitive imperatives. Net exports are projected to contribute more to growth going forward, supported by stronger U.S. activity and global demand for commodities. However, the cumulative effects of the persistent strength in the Canadian dollar and Canadaʼs poor relative productivity performance are restraining this recovery in net exports and contributing to a widening of Canadaʼs current account deficit to a 20-year high.”40

Over the past six months, the positive contributions from consumer spending, housing activity and fiscal stimulus have faded, and this is expected to continue into 2011. According to the Bank of Canada, “demand in Canada is expected to rely relatively less on household and government expenditures and more on business investment and net exports.”41

Expressed at an annualized rate, the goods-producing industries grew 0.8 per cent in the third quarter of 2010, while the output of the services-producing industries increased 0.1 per cent over the same period. This was the fourth consecutive quarter in which the increase in the goods-producing industries significantly outpaced that of the services-producing industries. The main sources of the third quarter growth were the increased activity in manufacturing, mining and the public sector. According to Statistics Canada, “the increase in manufacturing was concentrated in the production of durable goods, while the strength in mining was attributable largely to higher activity at copper, nickel, lead, and zinc mines.”42

“The weaker performance came mostly as a result of a substantial decline in exports and a solid gain in imports, which combined to subtract 3.5 percentage points off the headline advance. The arithmetic of net trade on growth overstated the weakness, however, as the import gain partly came from a further rapid increase of close to 4% in real domestic demand. With such a massive drag from net trade unlikely to be repeated, Q3 is likely to

39 Statistics Canada, The Daily, Canadian Economic Accounts, Third Quarter 2010 and September 2010, November 30,

2010. 40 Bank of Canada, Monetary Policy Report, January 2011, p.1. 41 Ibid, p.15. 42 Statistics Canada, The Daily, Canadian Economic Accounts, Third Quarter 2010 and September 2010, November 30,

2010.



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mark the low point in the economyʼs recovery, with real economic growth poised to accelerate to 2.5-3.0% in the coming quarters.”43

Consumer spending increased 0.9 per cent in the third quarter of 2010, with consumers spending more on both goods and services. Third quarter growth in consumer spending was similar to the average growth of the previous five quarters. After two consecutive quarters of declines, spending on new and used motor vehicle also advanced 1.8 per cent in the third quarter. In contrast, housing investment declined 1.3 per cent in the third quarter, posting the first decline since the first quarter of 2009.

Business investment in plant and equipment advanced 4.6 per cent in the third quarter, posting the third quarterly increase in 2010. This was the first time that quarterly growth was above 4.0 per cent since 2005. Machinery and equipment investment also expanded 6.5 per cent, led by gains in industrial machinery (+7.9 per cent) and computers and other office equipment (+11.0 per cent). According to the Bank of Canada, despite the strong growth in business investment since the end of 2009, only less than half of the decline that occurred during the recession has been recovered so far.44

“Consumer spending continued to grow robustly in the third quarter, while housing investment remained at a high level, despite the passing of several transitory supports to activity. The strength in consumer spending was in line with the growth of personal disposable income through the second and third quarters, leaving the savings rate near its historical low.”45

Figure 5: Real Gross Domestic Product: Canada

(annualized percentage change from preceding period)

Source: Statistics Canada, Canadian Economic Accounts

43 TD Bank Financial Group, Quarterly Economic Forecast, Canadian Economic Growth Prospects for 2011 Receive A

Moderate Boost, December 15, 2010, p.2. 44 Bank of Canada, Monetary Policy Report, January 2011, p.15. 45 Ibid.



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The Bank of Canadaʼs measure of the output gap indicates that the excess capacity in the Canadian economy was relatively stable at about -1.8 per cent in the fourth quarter of 2010. The results of the Bankʼs Business Outlook Survey showed that there was little change in the overall percentage of firms reporting that they would have difficulty meeting an unexpected increase in demand. According to the Bank of Canada, “this indicator of pressure on production capacity first moved up from its recession lows in the summer 2010 survey and has been essentially stable since then, staying within a range just below the historical average for the survey.”46 On balance, the Bank of Canada reported that the Canadian economy was operating at around 1.75 per cent below its production capacity in the fourth quarter of 2010. This was a slightly greater degree of slack in the economy than the Bank has previously expected in its October Monetary Policy Report. The Bank now expects the economy to return to full capacity by the end of 2012.

The views of the forecasters surveyed by the Conference Board of Canada on Canadaʼs economic prospects improved slightly from last Fallʼs survey. Forecasters surveyed by the Conference Board of Canada expect the Canadian economy to expand by 2.5 per cent in 2011 and 2.7 per cent in 2012. According to the International Monetary Fund (IMF), risks to Canadian economic growth over the next two years are mainly external. The Canadian economy will particularly be affected by the changes in commodity prices, notably mineral and energy prices, and a slowdown in the U.S. economy, which accounts for about three-quarters of Canadaʼs exports. Against this backdrop, Canadaʼs economy is expected to grow 2.5 per cent in 2011 and 2.9 per cent in 2012.

Table 5: Canadian Economic Outlook (% change, period-over-period annualized)

Category Q1* Q2* Q3* Q4 Q1 Q2 Q3 Q4 2010 2011 2012

Real GDP 5.6 2.3 1.0 2.3 2.9 3.2 2.8 2.7 2.9 2.6 2.5

Consumer Expenditures 4.1 2.3 3..5 3.0 2.9 2.7 2.6 2.4 3.4 2.8 2.4

Business Investment 11.4 15.0 19.8 19.1 10.0 10.2 0.4 8.5 5.7 12.8 8.1

Housing Starts ('000s) 198.0 199.0 192.0 175.0 170.0 160.0 150.0 160.0 191.0 160.0 170.0

Exports 10.1 5.6 -5.0 7.9 11.3 13.0 8.5 7.3 5.9 7.9 6.4

Imports 13.2 19.8 6.4 6.9 9.5 9.6 6.4 5.7 13.6 8.6 5.9

Employment 1.6 6.6 6.2 0.6 0.8 2.0 1.8 1.5 1.6 1.5 1.4

Unemployment Rate (%) 8.4 8.2 8.0 7.6 7.7 7.5 7..4 7.3 8.0 7.5 7.2

Productivity (Real GDP/worker) 1.6 1.6 1.2 0.7 0.3 1.0 1.5 1.4 0.9 1.0 1.0

Personal Serving Rate (%) 3.3 6.1 3.3 3.0 2.9 3.0 3.1 3.1 3.9 3.0 3.2


20112010 Annual

Source: TD Bank Financial Group, Quarterly Economic Forecast, December 15, 2010.

Responses to the Bank of Canadaʼs Autumn Business Outlook Survey47 reveal that businesses continue to be optimistic about the economic outlook for the next 12 months. However, many firms are still expecting modest growth, with strong competition and moderate demand being cited as some of the challenges along the road to economic recovery. On balance, just over half of the businesses expect their sales to increase at a greater rate over the next 12 months than over the previous 12 months. This is especially the case for the firms in the services sector. 46 Bank of Canada, Monetary Policy Report, January 2011, p.19. 47 The Business Outlook Survey summarizes interviews conducted by the Bankʼs regional offices with the senior

management of 100 firms selected in accordance with the composition of Canadaʼs gross domestic product.



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“While pursuing strategies to position themselves for growth, many firms continue to indicate that their expectations for sales growth are modest, citing such factors as strong domestic and foreign competition and moderate demand. Sales expectations are generally more robust among those involved in, or benefiting from, commodity-related activity—particularly in oil and mining.”48

While moderated somewhat from the record-high level reached in the Autumn Survey, businessesʼ intentions on investment spending remain elevated and signal an increase over the next 12 months. Forty-four per cent of the firms surveyed expect their investment in machinery and equipment (M&E) to be higher in the next year, while only 15 per cent expect investment to be lower, for a balance of opinion of +29 per cent. The factors generally cited as driving firmsʼ investment intentions include efforts to improve competitiveness by raising productivity, expanding into new areas and increasing output in line with strengthening demand.49

Following a decline in the Autumn Survey, the balance of opinion on employment conditions increased in the Winter Survey, to the level seen in the preceding three surveys. Forty-nine per cent of the firms indicated that they expect their level of employment to be higher in the next 12 months, while only eight per cent indicated it was going to be lower, for a balance of opinion of +41 per cent. In line with expectations of stronger sales and investment, the positive sentiments on employment conditions were widespread across all regions and all sectors.

The Conference Board of Canadaʼs Business Confidence Index also told a similar story of a more optimistic outlook for the Canadian economy. The Business Confidence Index increased from 95 in the previous quarter to 101.9 in the third quarter of 2010, posting the first three-digit index level since 2007.50

“Higher reported capacity utilization was the primary boost to confidence in the third quarter of 2010. Until now, excess capacity had been the main factor preventing further increases. Respondents were also enthusiastic about increasing capital expenditures in the near term.”

More than a third of the respondents said that their firm was operating at, close to, or above capacity in the third quarter of 2010, up from 23.8 per cent in the previous quarter. The percentage of firms indicating that they were operating below capacity also declined from 31.8 per cent in the second quarter to 20.0 per cent in the third quarter. In line with these results, approximately two-thirds of respondents said that now was a good time to expand their plant or to add to their stock of machinery and equipment. On the heels of this, 75 per cent of the respondents plan to increase their capital spending over the next six months, with 36.7 per cent expecting double-digit growth.51

“These responses indicate that the rebound in market demand has begun to absorb some of the economyʼs outstanding slack. But there is room for further improvement. In a typical pre-recession survey, more than one-half of respondents would report activity levels on par with capacity. The current response rate is still far below that level, and is more in keeping with the Bank of Canadaʼs recent finding that the Canadian economy is operating 1.75 per cent below potential.”52

48 Bank of Canada, Business Outlook Survey, Results of the Winter 2010-2011 Survey, January 10, 2011, p.2. 49 Ibid. 50 The Conference Board of Canada, Index of Business Confidence Autumn 2010, p.1. 51 Ibid. 52 Ibid.



31

According to the latest Business Barometer Survey from the Canadian Federation of Independent Business (CFIB)53, business sentiment among small and mid-sized businesses in Canada increased to 69.3 in the final month of 2010, more than 5 points above Novemberʼs level. Decemberʼs result also was also close to the post-recession high reached in March 2010. Measured on a scale between 0 and 100, an index level above 50 means owners expecting their businessesʼ performance to be stronger in the next year outnumber those expecting weaker performance. Past results suggest index levels normally range between 65 and 75 when the economy is growing.

"Interestingly, it wasn't holiday retail spending that accounted for the brighter sentiment. Instead, a large improvement in optimism among manufacturers, natural resource businesses, financial services and personal services firms pushed the overall index upward."54

Business sentiment among small and medium-sized businesses was highest in Newfoundland and Labrador, with an index score of 72.3. That was closely followed by Alberta (70.7), Ontario (69.5) and Saskatchewan (68.5).55

CONTRIBUTORY INFLUENCES A number of factors influence the Canadian economy. These factors are discussed in more detail in the following sections.

Canadian Dollar

The Canadian dollar averaged 99 cents U.S. in the final quarter of 2010, up three cents from an average of 96 cents U.S. in the previous quarter.56 Due to Canadaʼs relatively healthy fiscal conditions, a solid banking system and stronger economic recovery against the U.S. helped the Canadian dollar appreciate from just over 82 cents U.S. in the final quarter of 2009 to 99 cents U.S. in the final quarter of 2010. This corresponds to a 20 per cent increase over the two-year time period.

“The Canadian dollar has moved decisively through parity since the new year began, trading near its highest levels since early 2008. But interestingly this doesnʼt have much to do with any Canada-specific developments, as Canadian economic data has actually surprised to the downside more often than the upside. Instead, CAD has reacted to the US

economic data, and the upward move in consensus expectations for US economic growth this year.”57

While volatility of the global currency market has continued over the past year (2010), the value of the Canadian dollar against the U.S. dollar has been very stable. The Canadian dollar has traded in a range of 93 cents U.S. and 100 cents U.S. over 2010, bringing the trading range to 0.07 cents U.S. for the year. According to the Conference Board of Canada, this level of trading range was significantly narrower than in any of the past three years, when the Canadian dollar traded within a range of 0.23 cents U.S. in 2007, 0.22 cents U.S. in 2008 and 0.21 cents U.S. in 2009.

53 Canadian Federation of Independent Business, Business Parameter: National small business confidence ends the

year on a strong note, January 2011. 54 Ibid. 55 Ibid. 56 Bank of Canada, Financial Markets Department, Monthly Average of Exchange Rates,

http://www.bankofcanada.ca/cgi-bin/famecgi_fdps 57 TD Securities, Global Markets, January 18, 2011, p.11.



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“While other countriesʼ currencies have appreciated strongly against the U.S. dollar, Canadaʼs close ties to the U.S. economy have tempered some of the upward momentum the loonie is receiving from strong commodity prices, a relatively good fiscal position, and strong capital inflows into the Canadian economy. And although the high and stable value of the loonie has been a drag on business exports, it has provided a strong incentive for Canadian firms to resume importing productivity-enhancing machinery and equipment that will, in the long run, make them more competitive.”58

Figure 6: Historical Exchange Rate (CAD/US, monthly averages)

Source: The Bank of Canada, Rates and Statistics, Exchange Rates

Looking ahead, the Canadian dollar is expected to appreciate modestly over the next year, supported by the combined effects of a generally weaker U.S. dollar, strong commodity prices, and widening interest rate spreads between U.S. and Canada. Benefiting from Canadaʼs relatively strong fiscal position, the Canadian dollar is expected to be in demand by global investors. Once the Canada—U.S. interest rate differential returns to normal levels, the appreciation of the Canadian dollar is expected to be supported by commodity prices and more stable global currency markets.

The value of the Canadian dollar is expected to reach parity as early as the first quarter of 2011. By the fourth quarter of 2011, the Canadian dollar is forecast to trade between 97 cents U.S. and 104 cents U.S., and trade between 96 cents U.S. and 106 cents U.S. by the fourth quarter of 2012. The Conference Board of Canada expects the Canadian dollar to gradually appreciate and rise above parity in 2014.

58 Conference Board of Canada, Economic Forecast, Canadian Outlook Autumn 2010, p.45.



33

“In 2007 and 2008, the last time the loonie hovered so close to parity, the strength of the Canadian dollar imposed significant economic pain on some sectors and provinces. However, that pain also came with an important benefit—the stronger loonie made imported machinery and equipment cheaper, thus allowing Canadian manufacturers to make productivity-improving investments. Those investments are now paying dividends, allowing Canadian industries to be more competitive in the current near-parity environment.”59

According to TD Securities, the way in which the Canadian dollar will react to the developments in the U.S. economy will be the key factor in determining if the Canadian dollar will move as expected or not.

“When the US outlook improves weʼve tended to see the USD rally, but CAD rally even more, sending USD/CAD lower. This does make sense in some ways, since the strength of the US recovery is probably the biggest swing factor for Canadaʼs economic outlook this year. But if the US consensus growth forecasts continue to improve beyond an already decent 3 per cent projection, that would have a significant positive impact on the Canadian economic outlook, and hawkish interpretations for the Bank of Canada. So provided the Canadian data continue along their middling path, the US outlook could be the determining factor in whether weʼre right or wrong on CAD. For the time being though, we think that the mediocre job growth that weʼre seeing in the US will keep a lid on the pace of growth, supporting our mid-year forecast for USD/CAD to rise to 1.09 (or for CAD to fall to US$0.92) as the EUR tumbles.”60

Table 6: Exchange Rate Forecast – End of Quarter (CAD/US)

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

BMO Capital Markets* January 2011 0.997 1.000 1.009 1.021 1.021 1.015 1.008 1.002

RBC Financial Group January 2012 1.010 1.020 1.031 1.000 0.980 0.952 0.971 0.990

Scotiabank January 2013 1.000 1.010 1.020 1.042 1.042 1.053 1.053 1.064

TD Bank Financial Group January 2014 0.980 0.920 0.940 0.970 0.950 0.952 0.960 0.960

CIBC World Markets December 2010 0.971 0.943 0.971 0.990 0.990 1.000 n/a n/a

* Average for the quarter

Forecast Agency Date Released

2011 2012

Inflation

The Consumer Price Index (CPI) provides a broad measure of the cost of living in Canada. The Bank of Canada monitors changes in the CPI in deciding when to tighten monetary conditions to keep inflation within the range of the inflation-control target it has set (2.0 per cent per year).

Canadians paid on average 2.0 per cent more for the goods and services included in the all-items consumer price index (CPI) in the 12 months to November 2010, following an increase of 2.4 per cent in October.61 According to Statistics Canada, the 0.4 percentage point increase from October to November was largely

59 Conference Board of Canada, Economic Forecast, Canadian Outlook Autumn 2010, p.46. 60 TD Securities, Global Markets, January 18, 2011, p.11. 61 Statistics Canada, The Daily, Latest release from the Consumer Price Index, December 21, 2010.



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due to gains in energy, food and clothing prices. Energy prices increased 6.7 per cent year-over-year in November, after an increase of 9.1 per cent in October.

Main upward contributors to the 12-months change in the CPI came from price increases in gasoline (+7.2 per cent), electricity (+5.9 per cent), homeownerʼs replacement cost (+4.6 per cent), passenger vehicle insurance premiums (+4.2 per cent) and purchase of passenger vehicles (+3.9 per cent). Over the same period the main downward contributors were the price declines in video equipment (-14.8 per cent), computer equipment and supplies (-11.1 per cent), womenʼs clothing (-6.9 per cent), furniture (-2.9 per cent) and mortgage interest cost (-2.7 per cent).

Nationally, consumer prices were up in all provinces in November, with Ontario recording the largest increase (+3.0 per cent) and Alberta posting the smallest increase (+0.1 per cent).

The recent rise in the all-items CPI mainly reflects the impact of the Harmonized Sales Tax (HST) and other changes in provincial indirect taxes. Higher energy prices were also one of the key contributors to the total CPI gains in recent quarters. According to the Conference Board of Canada, the combined effect of the provincial tax increases will add about 0.4 percentage points to overall inflation in 2011.

The appreciation of the Canadian dollar also helped to keep inflation from heating up significantly. With the Canadian dollar expected to remain at or above parity with the U.S. dollar for the next two years, lower import prices are expected to tame consumer price pressure and hence minimize inflation.

The main upward risks to inflation as identified in the Bank of Canadaʼs January Monetary Policy Report include higher commodity prices and a greater than anticipated momentum in Canadian household spending. A stronger than expected global economy can boost commodity prices and increase Canadian income, which in turn can support stronger investment activity and household spending, putting an upward pressure on inflation. On the other side, the possibility of weaker than projected household spending and Canadian competitiveness can pose as the two main downward risks to inflation.

“The Bank expects net exports to provide greater support to the Canadian economic expansion over the projection horizon. However, with ongoing productivity challenges and the persistent strength of the Canadian dollar, the anticipated recovery in net exports may not fully materialize. Moreover, renewed tensions in foreign exchange markets could inhibit the necessary global adjustment and put additional pressure on freely floating currencies.”62

“With household expenditures in Canada significantly above their historical average as a share of GDP, growth in household spending might decelerate more rapidly than is currently anticipated. Relatedly, if there were a sudden weakening in the Canadian housing sector, it could have sizable spillover effects on other areas of the economy, such as consumption, given the high debt loads of some Canadians.”63

Overall, the all-items CPI in Canada is expected to increase 1.8 per cent in 2010. Total CPI inflation is then expected to sit around the 2 per cent mark for 2011 and 2012. The results of the Bank of Canadaʼs Winter Business Outlook Survey indicated that 91 per cent of firms expect average inflation over the next two years to remain within the 1 to 3 per cent control range.

62 Bank of Canada, Monetary Policy Report, January 2011, p.31. 63 Ibid.



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Table 7: All-Items Consumer Price Index

(year-over-year per cent change)

Q1 Q2 Q3 Q4 2010 2011 2012

CIBC World Markets January 2011 1.90 2.10 2.00 1.70 1.70 1.20 2.00

TD Bank Financial Group January 2011 2.60 2.40 2.30 2.10 1.80 2.30 2.00

BMO Capital Markets January 2011 2.20 1.00 1.40 1.20 1.70 2.10 1.90

RBC Financial Group December 2010 2.30 2.20 2.60 2.30 1.80 2.20 2.00

Scotiabank January 2011 2.20 2.10 2.00 2.00 1.80 2.10 2.20

Forecast Agency Date Released

Annual2011

To assess the trend of inflation, the Bank of Canada monitors the “core CPI” measure, which excludes eight of the CPIʼs most volatile components (fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation and tobacco products).64

Core inflation advanced 1.4 per cent in the 12 months to November 2010, following a 1.8 per cent increase in the previous month.65 The increase in core inflation recorded in October and November was in line with the Bank of Canadaʼs projection at the time of the October Monetary Policy Report. Given the excess supply in the economy and the moderation in the growth rate of the unit labour costs, core inflation has remained below 2 per cent in recent months. According to the Bank of Canada, “there is some evidence that HST-related tax refunds to businesses may also have been passed through, dampening core inflation in line with the Bankʼs expectations with considerable excess supply in the economy.”66

Interest Rates

The Bank of Canada adjusts monetary policy by raising and lowering the target for the overnight rate, the interest rate at which major financial institutions borrow and lend one-day funds among themselves.

“Monetary policy is concerned with how much money circulates in the economy and the purchasing power of that money. Since 1935, the Bank of Canada has been responsible for regulating credit and currency markets to enhance Canadaʼs economic well-being. The Bank exerts its regulatory influence on Canadian financial markets through the use of monetary policy tools— that is, by adjusting the monetary base and interest rates and, indirectly, the exchange rate.”67

After lowering its overnight target rate by 425 basis points between 2007 and 2009 to stimulate domestic demand, and being the first member of the G768 group of industrialized nations to raise interest rates since the global economic crisis with the 0.25 per cent increase announced in June 2010, the Bank of Canada left its overnight interest rate unchanged at 1.0 per cent on January 19, 2011 for a third consecutive meeting.

“Although the recovery lost some momentum over the course of 2010, the Canadian economy is expected to continue expanding above potential growth over the next two years. With the closure of the output gap not far off, and with wages and commodity prices on the rise, the Conference Board believes the Bank of Canada will resume its monetary tightening, raising interest rates throughout 2011 and 2012. The central bankʼs actions will

64 Bank of Canada, The Bank in Brief, The Consumer Price Index, January 2000. 65 Statistics Canada, The Daily, Latest release from the Consumer Price Index, December 21, 2010. 66 Bank of Canada, Monetary Policy Report, January 2011, p.20. 67 Conference Board of Canada, Long Term Economic Forecast, Canadian Outlook 2010, April 2010, p.23. 68 Other members of the G7 are the U.S., U.K., France, Germany, Italy and Japan.



36

help to keep inflationary pressures at bay and ensure inflation remains within the central bankʼs inflationary target band.”69

“Our baseline forecast that the economic recoveries in both the U.S. and Canada will be solidly in place and worries about their sustainability will ease sufficiently by the second quarter of 2011, sets up for the Bank to resume gradually increasing the policy rate. With inflation quiescent, the Bank will be in no hurry to remove policy stimulus and we look for a cumulative increase in the overnight rate of 100 basis points in 2011 to 2.0% with another 150 basis points in increases to 3.5% in 2012.”70

“In the wake of this announcement, we maintain our call that the BoC is more likely to wait until July to raise the overnight rate. This would be shortly after the U.S. Federal Reserve is done implementing its second round of quantitative easing in June. The BoCʼs next fixed announcement date is only six weeks away (March 1) and todayʼs communiqué did not signal a hike at this next meeting. Nonetheless, intrigue as to the specific timing of the next hike will still build in the months ahead. The March statement will be crucial to help determine whether markets should reasonably expect that to be as early as the spring or in the summer.”71

Table 8: Bank of Canada Overnight Rate – End of Quarter Projections (%)

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

BMO Capital Markets* Jan '11 1.00 1.17 1.50 1.83 2.33 2.83 3.33 3.75

CIBC World Markets Jan '11 1.00 1.25 1.75 2.00 2.00 2.00 n/a n/a

RBC Financial Group Dec '10 1.00 1.50 2.00 2.00 2.50 3.00 3.50 3.50

Scotiabank Jan '11 1.00 1.00 1.00 1.50 2.00 2.25 2.25 2.25

TD Bank Financial Group Dec '10 1.00 1.00 1.50 2.00 2.25 2.50 2.75 3.00

* Average for the quarter

2012

Forecast Agency

Date

Released

2011

Population

Canadaʼs population was estimated at 34,238,000 on October 1, 2010. During the third quarter of 2010, Canadaʼs population grew by 129,000 or 0.4 per cent from the second quarter of the year. The population growth rate observed in the third quarter (+0.4 per cent) was similar to that observed in the third quarter of the previous two years. However, according to Statistic Canada, “the vigorous pace of the estimated population growth in the July-to-September period of the last three years had not been seen in a third quarter since the late 1980s.”72

69 Conference Board of Canada, Economic Forecast, Canadian Outlook Autumn 2010, p.46. 70 RBC Economics, Economic and Financial Market Outlook, December 2010, p.5. 71 TD Economics, Data Commentaries, BoC leaves overnight rate at 1.00%, nudges up economic outlook, January18,

2011, p.1. 72 Statistics Canada, Quarterly Demographic Estimates July to September 2010, Publication No: 91-002-X.



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The main driver of the third quarter population growth was the net gain in international migration. Net international migration (+87,400) accounted for more than two-thirds of the population growth in the third quarter of 2010. This was also the highest net international migration level for a third quarter since 1988.

Populations increased during the third quarter of 2010 in all provinces, with the exception of Newfoundland and Labrador (-500 or -0.1 per cent). Western Canada continued to lead the provinces in terms of population growth, with Alberta, British Columbia and Saskatchewan all posting growth rates at or above the national average.

However, the largest population growth was observed in Prince Edward Island, which saw its population grow by 1,000 or 0.7 per cent to 143,200 in the third quarter of 2010. This level of population growth was also the provinceʼs largest gain since 1971. British Columbia posted the second highest rate of population growth across all provinces at 0.5 per cent.

Figure 7: Componets of Canadaʼs Population Growth

Source: Statistics Canada



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ALBERTA ECONOMY In line with expectations, the strong economic rebound that began in Alberta in the fall of 2009 and continued through 2010 has started to lose steam. While the post-recession recovery has been and is expected to be modest, the Alberta economy is on track for a full recovery by the middle of 2011. This strong performance is due to significant improvements in a number of areas, but particularly to a swift rebound in the energy sector and increased job creation since the second half of 2010.

"With interest in developing Alberta's oil sands growing ever higher, the gush of capital spending on megaprojects is expected to continue next year and beyond. This will pump tremendous activity into the provincial economy and act as a catalyst for both faster job growth and stronger migration from outside the province. These are the kinds of turnarounds that will spread the recovery more widely throughout Alberta's economy next year."73

Figure 8: Alberta Industry Outlook (% change, 2002 dollars)

Source: The Conference Board of Canada, Provincial Outlook Autumn 2010

The Alberta government announced in its 2010-2011 budget that it intends to increase operating expenses to $33.3 billion, a 5.7 per cent gain from the previous fiscal year.74 Most of this increase in spending will be concentrated on health and education services. As a result, employment in those industries is expected to expand by 5.7 per cent in 2010 and 3.9 per cent in 2011.

Employment in Alberta declined by 2,400 in December 2010 and the unemployment rate remained at 5.6 per cent. While, employment growth has remained behind the overall recovery, the situation is expected to firm up next year, with the Alberta economy creating approximately 60,000 jobs in 2011. Job creation over the medium term is expected to advance slightly faster than the national pace thanks to the expanding energy 73 RBC Economics, Provincial Outlook, December 2010, p.3. 74 The Conference Board of Canada, Provincial Outlook Autumn 2010, p.48.



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sector. The tighter labour market is also expected to position Alberta as a job search destination of choice for many Canadians and international migrants.

Albertaʼ s economy is expected to rely more on private sector investment in the medium term as the governmentʼs three-year plan shows a substantial decline in investment expenditures. The governmentʼs targeted capital budget for the 2012-2013 fiscal year is $6 billion, a significant decline from the current $7.2 billion. Fortunately, increased investment in oil sands development is expected to compensate for lower residential investment in the near term. According to the Conference Board of Canada, more than 20 new oil sands projects will go ahead before the end of the medium term with non-residential investment forecasted to expand 21 per cent in 2011, and then average 12.9 per cent over 2012 to 2015.

All in all, economic growth in Alberta is forecast to be 3.4 per cent in 2010. The strength of the goods-producing sector, driven by the expanding energy sector, is expected to push real GDP in Alberta up 4.3 per cent in 2011. According to RBC Economics, if it happens, a 4.3 per cent growth in 2011 will be the provinceʼs fastest annual growth since 2006. As the recovery becomes more widespread, income growth and consumer spending are expected to solidify, boosting the services-producing sector. With the combination of strong services-producing and goods-producing sectors, real GDP in Alberta is expected to expand 3.8 per cent in 2012.

“To date, the recovery from the last yearʼs severe recession in Alberta —its worst since the early 1980s—has not been easy. Things, however, are expected to become increasingly better next year, as the rising tide in the provinceʼs all important energy sector lifts boats in other parts of the economy. In fact, we forecast Alberta to rank second among the provinces in terms of growth in 2011, behind only Saskatchewan.”75

Albertans continue to be optimistic for Alberta and the national economy, with a focus on reducing debt, according to the most recent RBC Canadian Consumer Outlook Index.76 One-quarter of Albertans responding to the survey indicated that the local economy has improved in the last three months, slightly more than the national average of 20 per cent. However, only 27 per cent believe the local economy will improve in the next three months, down six per cent from the June 2010 level. Sixty-seven per cent of Albertans rate the current economic situation as good, significantly higher than the national average of 60 per cent.

The online Western Economic Expectation Survey, conducted through a partnership between the Canada West Foundation and the Western Centre for Economic Research, solicits views on the future economic performance of the four western provinces and Canada from a pool of about 1,800 economists and financial analysts. The results of the most recent Western Economic Expectation Survey show that more than half of respondents in Alberta expect the provinceʼs economy to perform “somewhat better” over the next six months, while only 10 per cent expect the local economy to perform “somewhat worse”. The percentage of respondents anticipating a better economy in the next few months is highest in Alberta compared to the other Western provinces.

However, when asked about a 3.5 per cent growth rate77 for Albertaʼs economy in 2011, 52 per cent of respondents indicate that this level of economic growth would be “too high” for the Alberta economy. While 47 per cent said it was “reasonably accurate”, only 1 per cent indicated it was “too low”.

75 RBC Economics, Provincial Outlook, December 2010, p.3. 76 The RBC Canadian Consumer Outlook Index, benchmarked as of November 2009, is conducted online via Ipsos

Reidʼs national I-Say Consumer Panel to 3,229 Canadians (499 British Columbia, 450 Alberta, 453 Saskatchewan/Manitoba, 827 Ontario, 544 Quebec, 455 Atlantic Canada).

77 This rate of economic growth was based on a weighted average of the major Canadian bank forecasts released since August 2010.



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CONTRIBUTORY INFLUENCES A number of factors influence the Alberta economy. These are discussed in the sections below.

Energy Industry

The price of West Texas Intermediate (WTI) crude oil averaged $85 U.S. per barrel in the final quarter of 2010, up 12 per cent from an average of $76 U.S. per barrel in the previous quarter. On an annual basis, the price of WTI crude oil averaged $79 U.S. per barrel in 2010, up approximately 30 per cent from an average of $62 U.S. per barrel in 2009.

Economic events in the last couple of years have shown how volatile the prices for key energy commodities can be. Over a relatively short time period of six months, the price of WTI declined from a record high of $134 U.S. per barrel in June 2008 to $39 U.S. per barrel in February 2009. The Energy Information Administration (EIA) forecasts that WTI spot prices will average around $92 U.S. per barrel in the first quarter of 2011, representing an $8 per barrel increase from last monthʼs Short Term Energy Outlook.78 The EIA expects WTI spot prices to continue to rise throughout the next two years and average $99 U.S. per barrel in the fourth quarter of 2012. Accordingly, the projected annual average WTI price is $93 U.S. per barrel in 2011 and $98 U.S. per barrel in 2012.

“There are many significant uncertainties that could push oil prices higher or lower than expected. Should OPEC not increase production as global consumption recovers, oil prices could be significantly higher than the central forecast. The rate of economic recovery, both domestically and globally, also remains uncertain due to a variety of factors including fiscal issues facing national and sub-national governments, China's efforts to address concerns regarding its growth and inflation rates, and unforeseen production issues.”79

Beginning with the October 2009 Short-Term Energy Outlook (STEO), the EIA started publishing confidence intervals for crude oil and natural gas. A confidence interval is defined as a range of low and high prices and is determined by the confidence level which represents the probability that the final market price for a particular commodity will be somewhere within the lower and upper range of prices.

According to the January STEO, WTI futures80 for March 2011 average $92 U.S. per barrel and showed an average volatility of 27 per cent. This means that price of WTI delivered in March 2011 can be anywhere between an upper limit of $110 U.S. per barrel and a lower limit of $76 U.S. per barrel. Last year at this time, the implied average volatility was 40 per cent, with the lower and upper limits at $66 U.S. per barrel and $102 U.S. per barrel, respectively. This implies that uncertainty over WTI spot prices is significantly lower this year compared to the same time last year.

78 U.S. Energy Information Administration, Short-Term Energy Outlook, January 11, 2011. 79 Ibid. 80 A future is defined as a financial contract obligating the buyer to purchase an asset (or the seller to sell an asset),

such as a physical commodity or a financial instrument, at a predetermined future date and price.



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Figure 9: Average Price of West Texas Intermediate Crude Oil (US$/Barrel)

Source: Energy Information Administration, Short-Term Energy Outlook January 2011

Natural gas prices81 have been declining since the beginning of 2010 (with the exception of a modest increase in June) and averaged $2.92 CAD per gigajoule (GJ) in October 2010, down 7 per cent from the previous month. During the third quarter of 2010, natural gas prices averaged $3.27 CAD per GJ, down 3 per cent from an average of $3.37 CAD per GJ in the previous quarter, but significantly up 20 per cent from an average of $2.71 CAD per GJ in the third quarter of 2009.

AJM Petroleum Consultants expect Alberta natural gas reference price to average $3.80 CAD per MCF82 this year and $3.85 CAD per MCF in 2011.83 Alberta natural gas reference price is expected to increase each year and reach $6.75 CAD per MCF in 2018.

81 Alberta Energy. The Alberta Natural Gas Reference Price (ARP) is a monthly weighted average field price of all

Alberta gas sales, as determined by the Alberta Department of Energy through a survey of actual sales transactions. The price is used for royalty purposes.

82 To convert MCF (thousand cubic feet of natural gas) to gigajoule, multiple by 1.05. To convert gigajoule to MCF, multiply by 0.95. http://www.ogsrlibrary.com/conversion_chart_oil_gas_ontario

83 AJM Petroleum Consultants, Gas Forecast, December 31, 2010.



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Figure 10: Average Price of Natural Gas (C$/GJ)

Source: Alberta Energy, Alberta Gas Reference Price History

There were on average 276 active drilling rigs in November 2010 in Alberta, up 81 per cent from an average 152 active drilling rigs in the same month of the previous year. For the first ten months of 2010, the number of active drilling rigs averaged 177 in Alberta, up 48 per cent from the same period of 2009. Rig utilization (the share of active drilling rigs in total rigs) from January to November 2010 was 32 per cent, up from a utilization rate of 20 per cent during the same period last year.

“Natural gas drillers face daunting challenges. Operating costs are likely to rise nearly as quickly as natural gas prices over the forecast. The cost of drilling in Alberta is higher than elsewhere in Canada due to competition from the conventional and unconventional oil industries for labour and materials. That means the break-even cost for new drilling is much higher in Alberta than elsewhere. Drilling is not expected to return to the historical peaks seen in the middle of the decade, regardless of the direction of natural gas prices. Lower drilling and weaker productivity will ensure that natural gas production in Alberta falls by one-third over the forecast period.”84

According to the Canadian Association of Oilwell Drilling Contractors (CAODC), there were an average of 400 active drilling rigs in Western Canada in the final quarter of 2010.85 CAODC estimates that the number of active rigs will increase to 480 in the first quarter of 2011, but will decline to 160 in the second half of the year. Rig utilization for 2010 was 43 per cent, doubling from a low of 24 per cent in 2009. The CAODC expects rig utilization to reach 45 per cent in 2011.

84 Conference Board of Canada, Long-Term Economic Forecast, Provincial Outlook 2010, p.76. 85 The Canadian Association of Oilwell Drilling Contractors, 2011 Forecast, October 22, 2010.



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Major Construction Projects

As of November 2010, there were 895 major construction projects worth $193.2 billion that were either planned, underway, or recently completed in Alberta. Of the major construction projects, approximately 56 projects worth $112 billion are oilsands related, 28 projects worth $7.2 billion are pipeline related, 7 projects worth $1.3 billion are oil and gas related, 5 projects worth $4.9 billion are mining related, 13 projects worth $1.7 billion are biofuels related, and 2 projects worth $75 million are chemicals and petrochemicals related.86

Manufacturing Shipments

Manufacturing sales in Alberta reached $5.2 billion in October 2010, posting an increase of two per cent from the previous month and an increase of 17 per cent year over year.87 Petroleum and coal product manufacturing and chemical manufacturing accounted for almost half of all manufacturing sales in Alberta in October. This was followed by food manufacturing, which accounted for 17 per cent of all sales in Alberta.

Inflation

Consumer prices for the goods and services included in the Consumer Price Index (CPI) in Alberta rose 0.1 per cent in the 12 months to November 2010 after rising 1.2 per cent in October.88 Nationally, consumer prices increased 2.0 per cent in November, following a 2.4 per cent increase in October 2010. All provinces registered annual price increases, but at a slower pace then they did a month ago. Across the country, Ontario posted the largest year-over-year increase in consumer prices in November 2010, while Alberta posted the lowest increase.

Figure 11: CPI All-items Index: Canada and provinces – November 2010

(Per cent change)

Source: Statistics Canada

86 Alberta Finance and Enterprise, Inventory of Alberta Major Projects Summary, November 2010. 87 Statistics Canada, The Daily, Monthly Survey of Manufacturing, December 15, 2010. 88 Statistics Canada, The Consumer Price Index November 2010, Publication No. 62-001-X.



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On an annual basis, the upward pressure in Novemberʼs all-items price index in Alberta came from higher prices in transportation (+2.1 per cent) and health and personal care (+1.6 per cent). According to Statistics Canada, much of the decline in the rate of growth was due to declines in natural gas (-12.8 per cent) and electricity (-8.1 per cent). Energy prices in Alberta declined 4.6 per cent in November from the same month last year. The all-items price index excluding food and energy increased 0.4 per cent year over year in November 2010.

Most of the major Canadian banks expect the all-items consumer price index in Alberta to advance by 1.1 per cent this year (2010). Looking ahead, most recent forecasts for CPI in Alberta range from 1.6 per cent to 2.4 per cent in 2011, and from 1.7 per cent to 2.4 per cent in 2011. The Conference Board of Canada expects the consumer price index inflation in Alberta to average 2.1 per cent annually from 2011 to 2030.

There are varying forecasts of how inflation will change in Alberta over the next two years. According to RBC Economics inflation forecast, Alberta will have the lowest inflation rate among all provinces both in 2011 (+1.6 per cent) and 2012 (+1.7 per cent). In contrast, TD Economics expects Alberta to have the third highest inflation rate at 2.4 per cent across all provinces in 2011, just behind Nova Scotia (+2.5 per cent) and Quebec (+2.6 per cent). According to TD Economics, Alberta will have the highest inflation rate in 2012.

Figure 12: CPI All-Items Index Forecast for 2010, 2011 and 2012, Canada and provinces

(Year over year percentage change)

Source: TD Economic Provincial Forecast Tables, December 2010.



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Housing Market

Housing starts in Alberta totaled 7,437 units during the third quarter of 2010, an increase of 20 per cent from the 6,202 units started during the same period in 2009. This increase was driven by a 71 per cent jump in multi-family starts, which totaled 2,798 in the third quarter of 2010. Single-detached starts have also shown improvements over last yearʼs level, totaling 4,043 units in the third quarter of 2010, up 5 per cent from the same period in 2009.

“Growth was particularly robust during the first half of the year due to improved economic outlook and demand conditions, as well as comparatively low levels experienced during 2009.”89

During the third quarter of 2010, housing starts were up 161 per cent in Medicine Hat and 146 per cent in Wood Buffalo. While somewhat lower when compared to other centres in Alberta, both Edmonton (+47 per cent) and Calgary (+33 per cent) also posted year-over-year gains in the third quarter of 2010.90 In contrast, Red Deer (-39.5 per cent), Grande Prairie (-35.6 per cent) and Lethbridge (-44 per cent) registered annual declines in housing starts.

Year-to-date to the end of September 2010, a total of 19,084 housing units were started in Alberta. This level of activity represented a 70 per cent increase over the 11,199 units started during the same period in 2009.91 Single-detached starts accounted for 66 per cent of total housing starts during the first nine months of 2010, while multi-family starts accounted for the remaining 34 per cent. On an annual basis, both single-detached and multi-family starts posted gains over their 2009 levels, with multi-family starts doubling to 6,577 units in the first nine months of 2010.

During the first nine months of 2010, housing starts were up 118 per cent in Edmonton, 82 per cent in Calgary, 40 per cent in Medicine Hat and 36 per cent in Red Deer compared to the same period in 2009.92 In contrast, Wood Buffalo (-14 per cent), Lethbridge (-14 per cent) and Grande Prairie (-3 per cent) registered a decline in housing starts over the same period.

While the probability of increasing inventories of single-detached units in Alberta will ease the production of single-detached units in the final quarter of 2010, single-detached starts are expected to gradually increase in 2011. Canada Mortgage and Housing Corporation (CMHC) is expecting single-detached starts in Alberta to total 19,150 units in 2010, 34 per cent above the 2009 level.93 Looking further, single-detached starts in Alberta are forecast to total 19,700 units in 2011, posting a 3 per cent increase from 2010.

“Moderation in single-detached starts for the remainder of 2010 will still allow starts to be nearly a third higher from 2009 levels. Market conditions that favour the buyer exist in Albertaʼs housing markets and will likely continue in the months ahead. A firming labour market with employment growth and wage gains will support new home sales. A movement towards improved market balance in 2011 will allow single-detached starts to increase in the low single-digits.”94

Multi-family starts are also expected to register some gains in 2010, however activity will remain low compared to historical long-term averages. According to CMHC, multi-family starts in Alberta will total 8,750 units in 2010, posting a 47 per cent gain from the previous year. Multi-family starts are then forecast to

89 Canada Mortgage and Housing Corporation, Housing Now- Prairie Region, Fourth Quarter 2010. 90 Ibid. 91 Ibid. 92 Canada Mortgage and Housing Corporation, Housing Now- Prairie Region, Fourth Quarter 2010. 93 Canada Mortgage and Housing Corporation, Housing Market Outlook — Prairie Region Highlights, Fourth Quarter

2010, p.2. 94 Ibid, p.2.



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decline 5 per cent from their 2010 levels, and total 8,300 units in 2011. All in all, total housing activity in Alberta is expected to gain traction in the next two years. A total of 27,900 units are expected to break ground in 2010 in Alberta, a 37 per cent gain from 2009. Total housing starts are then expected to increase further by a modest 0.4 per cent and total 28,000 units in 2011.

“Housing starts in Manitoba, Saskatchewan, and Alberta have all experienced a rebound in activity from last year. By year-end, it is expected that all three Prairie Provinces will report gains of over thirty per cent on an annual basis.”95

Figure 13: Alberta Total Housing Starts

Source: Canada Mortgage and Housing Corporation

After a strong first and second quarter, the number of Alberta homes sold in the Multiple Listing Service (MLS) totaled 11,961 in the third quarter of 2010, reflecting a 30 per cent decline from the same quarter of 2009. Year-to-date to the end of September 2010, MLS sales in Alberta totaled 39,820 units, down 12 per cent from the same period in 2009. Following three months of month-over-month price reductions, the MLS average resale price increased in September 2010 in Alberta. During the third quarter of 2010, MLS average resale prices rose 1 per cent to $349,048 compared to the same quarter of 2009. From January to September 2010, MLS resale price in Alberta averaged $354,165, posting a 4 per cent increase from the same period in 2009.

According to CMHC, “expectations of rising interest rates and changes to mortgage qualifying criteria created a sense of urgency to buy during the first half of 2010 that dissipated once changes were implemented.”96 MLS sales in Alberta are expected to total 47,900 units in 2010. This level of activity will be 17 per cent

95 Ibid, p.1. 96 Canada Mortgage and Housing Corporation, Housing Market Outlook — Prairie Region Highlights, Fourth Quarter

2010, p.1.



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below the 2009 level. A similar trend is also expected for 2011, where MLS sales are expected to total 48,800 units, posting a modest 1.9 per cent gain over 2010.

“Changing market conditions have removed the sense of urgency to buy as downward price adjustments have delayed some transactions. The pace of sales is projected to remain relatively stable for the remainder of this year before improving. The current buyersʼ market conditions will transition to balanced conditions but not likely before next spring. An expanding economy with employment and wage growth will aid demand.”97

With lower demand and an increased supply, housing market conditions have softened in most of Albertaʼs major markets, which has led to price adjustments. MLS average resale prices in Alberta are expected to increase 2.6 per cent on an annual basis to $350,150 in 2010.98 The MLS average resale prices are then expected to increase further by a marginal 0.7 per cent to $352,600 in 2011.

Building Permits

Alberta contractors took out $2.66 billion in building permits ($1.58 billion in residential permits and $1.1 billion in non-residential permits) during the third quarter of 2010. Building permits issued in Alberta during the third quarter were down 20 per cent from the previous quarter, but were up 1 per cent from the same quarter of 2009. On an annual basis, residential permits declined 7 per cent, while non-residential permits showed an increase of 13 per cent. Most of the increase in the non-residential sector was attributable to the gains in industrial permits (+93 per cent) with some gain in commercial permits (+7 per cent). In contrast, the value of institutional and governmental permits issued in Alberta during the third quarter was down 14 per cent compared to the same period in 2009.

In November 2010, the value of building permits issued in Alberta totaled $795 million, down 29 per cent from the previous month. Both residential and non-residential building permits were also down 29 per cent in November.99 Nationally, contractors took out $5.5 billion worth of building permits in November, down 11 per cent from the previous month, posting the second consecutive monthly decline. The value of building permits was down in seven provinces in November, with British Columbia, Ontario and Newfoundland and Labrador posting the largest declines. In contrast, Quebec registered the largest increase in November 2010.

Looking at the census metropolitan areas (CMA) in Canada, the total value of permits was down in 19 out of 34 CMAs in November 2010. Vancouver, Toronto and St. Johnʼs posted the largest declines in building permits, while Montreal and Victoria posted the largest gains.100 Compared to the same month in 2009, the total value of building permits issued in the Edmonton CMA declined 46 per cent to $285 million in November 2010. Over the same period, the total value of building permits issued in Calgary also declined 28 per cent to $227 million.

97 Ibid, p.2. 98 Canada Mortgage and Housing Corporation, Housing Market Outlook — Prairie Region Highlights, Fourth Quarter

2010, p.2. 99 Statistics Canada, The Daily, Building Permits November 2010, January 10, 2011. 100 Ibid.



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Figure 14: Value of Building Permits (Alberta), seasonally adjusted

Source: Statistics Canada, CANSIM Table No: 260006

Non-Residential Building Construction

Investment in non-residential building construction in Alberta totaled $2.2 billion in the fourth quarter of 2010, down 1.8 per cent from the previous quarter.101 On an annual basis, investment in non-residential building construction was also down 7 per cent, putting Alberta in first place in terms of largest year-over-year declines. Nationally, total investment in non-residential building construction in the fourth quarter was $10.55 billion, up 5.3 per cent from the same quarter of 2009.102 Eight provinces recorded annual gains in the fourth quarter, with Ontario leading the growth, where both institutional and commercial investment increased.

The main factor in Albertaʼs decline was a drop in institutional investment, which declined 16 per cent year-over-year. This decline was mainly a result of lower investment in health care facilities, as well as education and other public facilities. Commercial investment in Alberta in the fourth quarter was also down 3.6 per cent from a year ago.103

The only component of non-residential construction investment that registered an annual gain in Alberta during the final quarter of 2010 was industrial investment. Industrial investment in Alberta increased 13.6 per cent from the fourth quarter of 2009, and it was also up by a marginal 0.9 per cent from the third quarter of 2010. However, the gains in industrial investment were not enough to offset the declines in institutional and commercial construction.

101 Statistics Canada, The Daily, Investment in non-residential building construction, January 17, 2011. 102 Ibid. 103 Ibid.



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Retail and Wholesale Trade

Retail sales in Alberta totaled $14.8 billion in the third quarter of 2010, reflecting an increase of 2 per cent from the previous quarter and an increase of 5 per cent from the same quarter of 2009. In October 2010, retail sales in Alberta reached $5.0 billion, up 6 per cent from the same month of 2009.104 While, all provinces registered annual gains in October, Alberta posted the largest increase, a rate that was also well above the national rate of 3.3 per cent.

Wholesale sales in Alberta were at a seasonally adjusted level of $15.9 billion in the third quarter of 2010. This level of sales represents a 6 per cent increase from the previous quarter and a significant 18 per cent increase from the same month of 2009.105

In October 2010, wholesale sales in Alberta totaled $5.3 billion. While Octoberʼs sales were up 23 per cent compared to the same month of 2009, sales were down 2.4 per cent from the previous month. According to Statistics Canada, lower sales in the machinery, equipment and supplies and the miscellaneous sectors were the main drivers of the decline in October.

“In Alberta, the drop in sales in October followed a period of strong growth that began in November 2009, spurred by strong sales in the machinery, equipment and supplies sub-sector.”106

Figure 15: Alberta Retail and Wholesales Sales ($ billions), seasonally adjusted

Source: Statistics Canada, CANSIM Table No: 800020, 810011

104 Statistics Canada, The Daily, Retail Trade, December 21, 2010. 105 Statistics Canada, The Daily, Wholesale Trade, December 20, 2010. 106 Ibid.



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Nationally, eight provinces posted lower wholesale sales in October compared to the previous month. However, these declines were offset by increase sales in Ontario, which kept national wholesale sales unchanged at $44.9 billion in October. Wholesale sales in Ontario, which account for more than 50 per cent of all wholesale sales in Canada, increased 1.5 per cent to $23.3 billion in October 2010, mainly driven by higher sales in the motor vehicle industry.107

Average Weekly Earnings

Average weekly earnings of Albertaʼs payroll employees were at a seasonally adjusted level of $1,012.50 in October 2010. This represents a decline of 1.6 per cent from September, but an increase of 6.6 per cent from October 2009.108 Despite the month-over-month decline, average weekly earnings in Alberta were still the highest in the country. Nationally, average weekly earnings increased 4.4 per cent year-over-year to $863.30 in October 2010. Every province registered annual gains in average weekly earnings in October, with Saskatchewan, Alberta, Nova Scotia and Ontario posting growth rates at or above the national average.

According to Statistics Canada, the pace of growth in average weekly earnings in Canada has been on an upward trend in recent months. Octoberʼs gain marked the third consecutive month in which the year-over-year growth was above 4.0 per cent. The rate of growth in earnings surpassed 3.0 per cent for four months in a row prior to October and hovered below 2.0 per cent for most of 2009.

“Some of the growth in weekly earnings between October 2009 and October 2010 was attributable to a 0.9% increase in the average number of hours worked per week. The remainder of the increase reflects a number of other factors, including wage growth, changes in the composition of employment by industry, changes in occupations within industry and job experience.”109

Among Canadaʼs largest industrial sectors, average weekly earnings in manufacturing, wholesale trade, professional, scientific and technical services, and administrative and support services increased more than 4.4 per cent year-over-year in October 2010. In contrast, the construction sector registered the slowest growth in earnings.

“In October, while the growth in year-over-year average weekly earnings in construction (+0.3%) was the lowest of all major industrial sectors, there were notable differences within the sector. While both earnings and employment increased in specialty trade contracting and building construction over the 12-month period, both earnings and employment declined in heavy and civil engineering construction, the sub-sector with the highest average weekly earnings. The earnings decline in this sub-sector pulled down overall average earnings growth in construction over the period.”

107 Ibid. 108 Statistics Canada, The Daily, Payroll employment, earnings and hours, December 23, 2010. 109 Ibid.



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Figure 16: Average weekly earnings of payroll employees October 2010

(Canada and provinces, seasonally adjusted)

Source: Statistics Canada, Payroll employment, earnings and hours

Bankruptcies and Employment Insurance

A total of 2,064 Albertans and Alberta businesses filed for bankruptcy in the third quarter of 2010. Bankruptcies were down 10 per cent from the previous quarter and down by 32 per cent from the same quarter of 2009.110 During the third quarter, both consumer bankruptcies (-32.4 per cent) and business bankruptcies (-11.7 per cent) were lower compared to the same quarter in 2009. Nationally, bankruptcies totaled 22,955 in the third quarter of 2010, down 11 per cent from the previous quarter and down 31 per cent year-over-year. Manitoba (-11.5 per cent) registered the largest decline in total bankruptcies compared to the previous year, while Prince Edward Island (+12.2 per cent) had the largest increase.111

Consumer and business bankruptcies in Alberta totaled 724 in October 2010, down 5.5 per cent from the previous month, but up by a marginal 0.1 per cent from the same month last year.112 A total of 700 Albertans filed for bankruptcy in October, posting a decline of 4 per cent from September 2010, but an increase of 1.4 per cent year-over-year.

“While the number of consumer insolvencies in Alberta did spike upwards sharply during the recession, the spike was short lived. Furthermore, the number of bankruptcies has already returned to pre-recession levels, showing that, in general, Albertans managed to weather the economic storms brought on by the recession fairly well.”113

110 Office of the Superintendent of Bankruptcy Canada, Insolvency Statistics in Canada — Third Quarter of 2010. 111 Ibid. 112 Office of the Superintendent of Bankruptcy Canada, Insolvency Statistics in Canada, October 2010. 113 Troy Media by Dan Summer. ATB Financial, Alberta economic snapshot for the week ending Jan. 7, 2011, January 7,

2011.



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Figure 17: Personal and Business Bankruptcies in Alberta

Source: Office of the Superintendent of Bankruptcy Canada

The number of Albertans receiving regular Employment Insurance (EI) benefits averaged 47,057 in the third quarter of 2010, down 5 per cent from an average of 49,057 beneficiaries in the previous quarter, and down 27 per cent from an average of 64,037 beneficiaries in the third quarter of 2009.

A total of 47,490 Albertans received regular Employment Insurance (EI) benefits in October 2010, down 0.9 per cent from the previous month and down 35 per cent year-over-year.114 On an annual basis, Alberta posted the largest decline in the number of regular EI beneficiaries across all provinces in October. Compared to October 2009, the number of regular EI beneficiaries was down 14.7 per cent in Canada.

“All 12 large centres in Alberta had fewer beneficiaries in October compared with October 2009. The pace of decline was fastest in Brooks, Camrose, Red Deer, Grande Prairie and Medicine Hat. For the seventh consecutive month, there were fewer beneficiaries in Calgary and Edmonton. In Calgary, the number of beneficiaries fell by 6,900 to 11,600. In Edmonton, the number declined by 3,600 to 11,300.”115

114 Statistics Canada, The Daily, Employment Insurance, December 16, 2010. 115 Ibid.



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Figure 18: Employment Insurance Beneficiaries: Prairies

(Percentage Change, October 2009 to October 2010)

Source: Statistics Canada.

Population

Population growth in the third quarter of 2010 remained strong in Western Canada, as Alberta, British Columbia and Saskatchewan all posted growth rates above the national average. Albertaʼs population grew by 14,140 (+0.38 per cent) to 3,735,086 from July 1 2010, to October 1, 2010.116 This represents an increase of 51,643 persons from October 1, 2009 and a yearly growth rate of 1.4 per cent, the smallest year-over-year growth in Alberta since 1995.117

Unlike any other province, Albertaʼs third quarter population growth was driven mainly by natural increase. In Alberta, natural increase (births minus deaths) accounted for approximately 60 per cent of the population increase in the second quarter of 2010 (+8,267), a much higher proportion than in any other province.118

116 Statistics Canada, The Daily, Canadaʼs population estimates, Third quarter 2010 (preliminary), December 22, 2010. 117 Alberta Finance and Enterprise, Quarterly Population Report Third Quarter 2010, December 22, 2010. 118 Statistics Canada, The Daily, Canadaʼs population estimates, Third quarter 2010 (preliminary), December 22, 2010.



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According to ATB Financial, “Alberta has the highest natural growth rate in the country, reflecting the high percentage of young families of child-bearing age.”

Over the same period, net international migration accounted for 33 per cent of the increase (+4,718), while inter-provincial migration accounted for the remaining 8 per cent (+1,155). While inter-provincial migration accounted for less than 10 per cent of total quarterly population increase, this was the third consecutive gain this year after two consecutive quarterly losses in the third and fourth quarters of 2009. British Columbia, Ontario and Saskatchewan were the top three sending as well as receiving provinces of Albertaʼs inter-provincial migration.

“During the last ten years Alberta has been the benefactor of a large influx of interprovincial migrants; however, that trend reversed during the recession. On the other hand, over the last two years international migration continued unbounded, and in 2010 Alberta will attract a record number of international immigrants. Through just the first three quarters of 2010 on a net basis, Alberta attracted 18,922 international migrants, already more than in 2009 (the previous record year) despite there still being an entire quarter of migration data left. Over the last fifteen years the trend has been towards a higher number of international immigrants to Alberta but the numbers were particularly high between 2008 and 2010.”119

Figure 19: Components of Alberta's Population Growth

Source: Statistics Canada, Quarterly Demographic Estimates

119 ATB Financial, Daily Economic Comment, International Migrants Flock to Alberta, January 12, 2011.



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CALGARY REGION ECONOMY The impacts of the global economic crisis resulted in Calgaryʼs real gross domestic product (GDP) declining by 4.5 per cent in 2009. Two sectors that had boosted Calgaryʼs economy during the boom years – energy and construction – were especially hit hard by the economic crisis. Construction activity in Calgary fell drastically by 22 per cent in 2009, following an impressive average annual growth rate of 7.7 per cent between 2004 and 2008. According to the Conference Board of Canada, the decline in 2009 was the largest on record for Calgaryʼs construction industry.

However, as 2009 came to an end, economic activity started to turn around and remained buoyant for the most part of 2010. Increased manufacturing and construction activity has pushed the goods-producing sector output up. Profiting from a pickup in consumer spending, increased retail sales and a continued strength in the public sector have boosted the services-producing sector. Retail sales in Calgary are expected to increase by 5.1 per cent in 2010, following a decline of approximately 8.0 per cent the previous year.

“Like the ascent from Calgary to the Rockies, the road out of recession has been an uphill yet, by no means, a steady climb. Month-over-month indicators show mild undulations through the year and, after a 2009 with two distinct personalities – a volatile first half and more stable but measured second half – 2010 was a continual climb up Scott Lake Hill.”120

Table 9: Calgary Economic Outlook (% change, period-over-period)

Category 2007* 2008* 2009* 2010f 2011f 2012f 2013f 2014f

Real GDP 3.3 1.1 -4.5 3.5 3.8 4.4 4.3 4.2

Personal Income per Capita 4.4 4.8 -1.2 0.8 3.6 2.9 3.5 3.4

Consumer Price Index (2002=1.0) 5.0 3.2 -0.1 1.0 1.9 2.4 2.0 2.2

Population 2.9 3.0 3.2 2.5 1.9 2.0 2.0 1.9

Total Employment 3.9 3.5 -0.9 -0.6 3.7 2.4 2.7 2.2

Unemployment Rate (%) 3.2 3.5 6.7 7.3 6.7 5.6 4.9 4.4

Total Housing Starts ('000s) 13.5 11.4 6.3 9.2 8.8 9.7 9.8 10.3

Retail Sales 8.0 0.3 -7.7 5.1 5.4 6.1 6.2 5.7

Source: Conference Board of Canada, Metropolitan Outlook — Autumn 2010


The results of the 2010 Calgary Economic Development Business Survey indicate that Calgary businesses are showing more optimistic expectations for Calgaryʼs economy and their businesses going into 2011. The 2010 Business Survey121 was designed to examine business and market conditions in the Calgary region. Specifically, business contacts were asked their opinions on the economic outlook for Calgary, the outlook for Calgary as a place for business expansion and investment, and their organizational plans for hiring and capital budgets.

120 Calgary Economic Development, State of the Economy, Calgary Semi-Annual Economic Review, January 2011, p.3. 121 For the 2010 Business Survey, a total of 5,318 Calgary Economic Development contacts were surveyed between

June 1 – 28, 2010.



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Survey findings showed that more than half of the businesses in Calgary feel that the economic downturn had a “moderate” impact on Calgaryʼs economy. Thirty-three per cent of businesses reported that the downturn had a “major” impact on Calgaryʼs economy, while more than three-quarters said it had a “negative” impact. The top issues facing Calgaryʼs economy and businesses are cited as follows:

General economic issues: lack of economic diversification, lack of jobs and employment, recession and cost of living.

The oil and gas industry: low and unstable prices, dependence on the oil and gas industry, lack of growth and stimulation of the industry.

Municipality—services and infrastructure: lack of infrastructure plan and vision, public transportation, urban sprawl and high business taxes.

Government (all levels): lack of accountability and transparency, lack of leadership, deficits and overspending.

Looking ahead, 38 per cent of respondents said they expect Calgaryʼs economy to grow “more” in the next 12 months, while 10 per cent indicated they expect it to grow “less”, for a balance of opinion of 28 per cent. Compared to last year, the share of businesses expecting stronger growth increased from 31 per cent in 2009 to 38 per cent in 2010, while those expecting a slow down declined from 28 per cent in 2009 to 10 per cent in 2010.

On the employment front, four in one businesses indicated that they are currently maintaining their labour force and plan to do so in the near term, while 17 per cent indicated that they were currently hiring and plan to continue hiring.

All in all, Calgaryʼs economy is expected to expand by 3.5 per cent in 2010. As the economic recovery continues and job growth resumes, real GDP is forecast to post a 3.8 per cent rate of growth in 2011. According to Calgary Economic Development, a combination of moderate employment growth, commiserate labour income growth and increased consumer confidence will drive the economic growth in Calgary in 2011 and beyond.

The Conference Board of Canada expects the Calgary economy to grow by 4.2 per cent annually from 2011 to 2014, placing Calgary first in terms of real GDP growth among 13 CMAs included in the Metropolitan Outlook Report.122

“For Calgary, a couple of primary factors – continued, depressed natural gas prices and the laggard economy in the United States – have been a constant headwind, creating drag on the vehicle. At the same time, lagging confidence from consumers and businesses has meant pressure on the gas pedal has been weak, particularly as bends in the road appear. However, with oil prices recovering to pre-recessionary levels, strong recent indicators of foreign direct investment and commercial real estate absorption rates – particularly of high-end space – exceeded expectations in late 2010. There may be a tailwind forming. With 2010 behind us and 2011 stretched out in front, we look at the condition of the vehicle and the road ahead which will both impact our journey.”123

122 The Conference Board of Canada, Economic Insights Into 27 Canadian Metropolitan Economies, Metropolitan

Outlook 1- Autumn 2010, September 2010, p.3. 123 Calgary Economic Development, State of the Economy, Calgary Semi-Annual Economic Review, January 2011, p.1.



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CONTRIBUTORY INFLUENCES A number of factors influence the Calgary economy.

Inflation

All Census Metropolitan Areas (CMAs) recorded year-over-year price increases in the Consumer Price Index (CPI) in November 2010, with the exception of the Calgary CMA, where consumer prices were essentially unchanged when compared to the same month of 2009. Toronto (+3.0 per cent), Thunder Bay (+3.0 per cent) and Vancouver (+2.6 per cent) posted the largest annual increases in November, while Calgary posted the smallest.124

In the 12 months to November 2010, consumer prices increased by 0.1 per cent in Alberta, and 2.0 per cent nationally. The main downward pressure on overall inflation in the Calgary CMA came from water, fuel and electricity prices, which declined 7 per cent year-over-year in November 2010. While rented accommodation prices declined 2.4 per cent year-over-year, owned accommodation prices increased 0.8 per cent over the same period, resulting in an overall price decline of 0.8 per cent for the shelter components of the all-items CPI in the Calgary CMA.125

The Conference Board of Canada expects inflation in the Calgary CMA to average 1.0 per cent in 2010 and gradually increase to 2.4 per cent in 2012. Inflation in the Calgary CMA is then forecast to decline and hover around 2.0 per cent from 2012 to 2015. Calgary Economic Development expects inflation to be around 2.5 per cent in 2011, slightly higher than the Conference Board of Canada forecast.

Figure 20: Consumer Price Index Forecast: Calgary (% change)

Source: Conference Board of Canada, Metropolitan Outlook 1 Autumn 2010

124 Statistics Canada, The Daily, Latest Release from the Consumer Price Index, December 21, 2010. 125 Ibid.



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Housing Market

Total housing starts in the Calgary CMA declined 33 per cent year over year to 555 units in November 2010, with both single-detached and multi-family126 starts contributing to the decline. This was only the second time in 2010 that total housing starts declined year over year. 127 The first time was in September 2010, when housing starts decreased 2.0 per cent year over year.

Single-detached starts reached 366 units in November, down 39 per cent from the 604 units started in the same month of 2009. According to CMHC, one of the reasons the changes have been so profound in recent months is because current moderation in single-detached starts is being compared to a period when housing activity was on an upward trend.128

On the multi-family front, a total of 189 multi-family units were started in November 2010, down 17 per cent from the 228 units started in November 2009. After 10 consecutive months of increases, Novemberʼs decline was the first year-over-year decline of 2010 in multi-family starts.

Total housing starts in the Edmonton CMA also showed a similar trend, and declined 20 per cent to 755 units in November 2010. Single-detached starts in the Edmonton CMA declined 25 per cent to 453 units in November 2010, while multi-family starts were down 9.3 per cent to 302 units compared to the same month of 2009.129

Table 10: Housing Starts - January to November

2009 2010 2009 2010 2009 2010

Alberta (10,000+) 10,947 14,777 4,895 7,961 15,842 22,738 43.5%

Calgary CMA 4,216 5,449 1,445 3,327 5,661 8,776 55.0%

Calgary City 3,257 4,075 1,152 2,810 4,409 6,885 56.2%

Edmonton CMA 3,449 5,753 2,056 3,648 5,505 9,401 70.8%

Edmonton City 1,932 3,240 1,381 2,545 3,313 5,785 74.6%

% Change

2009–2010

Source: Canada Mortgage and Housing Corporation

Single Multiple Total

Area

Despite the moderation in single-detached activity, to the end of November, single-detached starts in the Calgary CMA increased 29 per cent to 5,449 units in 2010, compared to 4,216 units started during the same period in 2009. Gradually improving economic conditions combined with employment and income growth are expected to increase new construction activity at a modest rate in 2011. Against this backdrop, single-detached starts in the Calgary CMA are on pace to increase 24 per cent to 5,900 units in 2010 and increase by a further 3 per cent to 6,100 units in 2011.130

“Following a brisk start in the first half of the year, the pace of production towards the end of 2010 has moderated as builders adjust to a slowdown in new home sales and elevated competition from the resale market. New home construction will initially be held back by an elevated level of active listings in the competing resale market that are expected to persist

126 Multi-family housing starts include semi-detached, row and apartment units. 127 Canada Mortgage and Housing Information, Housing Now — Calgary CMA, December 2010. 128 Ibid. 129 Canada Mortgage and Housing Information, Housing Now — Edmonton CMA, December 2010. 130 Canada Mortgage and Housing Information, Housing Market Outlook — Calgary CMA, Fall 2010.



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into the first quarter of 2011. However, activity will pick up in the latter half of the year as the market becomes more balanced and the economy gains more traction.”131

Year-to-date, multi-family starts in the Calgary CMA more than doubled to 3,327 units in 2010, compared with 1,445 units started during the same period in 2009. Following 2009, which was the year that saw multi-family starts decline to its lowest level since 1996, multi-family starts are forecast to reach 3,200 units in 2010, more than double the units started in 2009.132 To date, the performance of the multi-family starts has been driven by a strong apartment production. As apartment inventories are projected to remain high in 2011, builders are expected to increase their pre-sales before turning to new starts. Thus, multi-family starts in the Calgary CMA are forecast to decline by an estimated 13 per cent to 2,800 units in 2011.

Overall, CMHC is expecting total housing starts to reach 9,100 units in 2010, up 44 per cent from the 6,318 units started in 2009. Housing activity in the Calgary CMA is then projected to moderate and total 8,900 units in 2011, a level that is slightly lower than 2010. According to CMHC, “the decline in total starts in 2011 can be attributed to fewer multi-family units breaking ground in response to an elevated inventory of complete and unsold units.”133

In comparison, total housing starts in the Edmonton CMA are expected to reach 9,700 units in 2010, representing an increase of 54 per cent over 2009.134 While an improving economy is expected to increase demand, higher prices and competition from resale markets are likely to prevent any gains in housing activity. Builders in the Edmonton CMA are forecast to start 9,600 units in 2011, representing a decline of one per cent from 2010. Both single-detached and multi-family starts are expected to follow the same trend by posting an increase of about 55 per cent in 2010 and a decline of one per cent in 2011.

Figure 21: Housing Starts Forecast: Calgary CMA

131 Canada Mortgage and Housing Information, Housing Market Outlook — Calgary CMA, Fall 2010. 132 Ibid. 133 Ibid. 134 Canada Mortgage and Housing Information, Housing Market Outlook — Edmonton CMA, Fall 2010.



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According to the recent figures released by the Calgary Real Estate Board, the number of single-family metro135 homes sold in December 2010 in Calgary totaled 734, a decline of 18 per cent month-over-month. On an annual basis, the number of single-family metro homes sold in December was down 8 per cent compared to the same month of 2009. In contrast, the number of metro condos sold in Calgary in December increased to 320 units, up from the 310 metro condos sold in November 2010, but down six per cent from the same time a year ago.

“Undoubtedly housing markets in Alberta and Calgary underperformed in 2010, as sales recoveries did not materialize as forecasted. In many ways, re-sales in 2010 showed a repeat of 2008, with a short lived resurgence in the first few months, when confidence returned to the market.”136

With Decemberʼs numbers in, total single-family home sales reached 12,095 in 2010, representing a decline of 16 per cent from 2009. According to the Calgary Real Estate Board, single-family home sales in 2010 were at their lowest level since 1995, when a total of 9,534 single-family homes were sold in Calgary. Similarly, the number of metro condos sold in Calgary reached 5,181 sales in 2010, representing a decline of 18 per cent from 6,328 condos sold in 2009.

“Employment and net-migration have been slower to pick up here in Calgary—and these are key drivers of our housing market. The good news is we are now seeing marked improvements in investment and employment in the energy sector. We believe these green shoots in our economy, supported by improved affordability and low interest rates, will eventually translate into a gradual recovery of our housing market as we move into 2011.”137

The median price of a single-family home sold in Calgary in December was $389,000, posting a decline of 2.5 per cent from the previous month, when the median price was $399,000. Year-over-year, the median price of a single-family home in Calgary declined 3 per cent. The median price of a metro condo unit sold in Calgary in December was $258,000, reflecting an increase of 2 per cent from the previous month, but a decline of 2 per cent year-over-year.

With increased employment and net migration, MLS sales in the Calgary CMA are forecast to total 20,700 units in 2011, showing a modest growth of 2 per cent from 2010. 138 As buyers and sellers respond to the increased active listings and slower sales, the average resale price is expected to moderate into early 2011. Average MLS resale prices in Calgary are forecast to increase by a slim 0.5 per cent to $401,000 in 2011.139

Rental vacancies in the Calgary CMA declined for the first time in October 2010 after three consecutive years of increases. The vacancy rate in the Calgary CMA was 3.6 per cent in October 2010, down from 5.3 per cent in 2009.140 In October 2010, Calgary had the lowest vacancy rate across Albertaʼs seven largest urban centers. In the Edmonton CMA, the average apartment vacancy rate declined to 4.2 per cent in October 2010 from 4.5 per cent in 2009. The vacancy rate in Albertaʼs urban centres was 4.6 per cent in October, also down from 5.5 per cent in 2009.141

135 Calgary Real Estate Board — all Calgary metro MLS statistics include properties listed and sold only within Calgary

City limits. 136 Calgary Real Estate Board, Housing Statistics Calgary Metro Statistics, December 2010, p.1. 137 Ibid. 138 Canada Mortgage and Housing Information, Housing Market Outlook — Calgary CMA, Fall 2010. 139 Ibid. 140 Ibid. 141 Canada Mortgage and Housing Information, Rental Market Outlook — Alberta Highlights, Fall 2010.



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“Improvements in labour market conditions and recent gains in provincial net migration have contributed to higher rental demand. In addition, with rental rates moderating from the previous year and real estate prices in Calgary easing since the spring, the motivation for tenants to move into homeownership has moderated.”142

The average rent for a two-bedroom apartment suite in the Calgary CMA was $1,069/month in October 2010, down from $1,099/month in the same month of 2009. This was the second consecutive year in which the average rent for a two-bedroom apartment posted a year-over-year decline.

“The average two-bedroom rent declined for the second consecutive year as vacancy rates, although moving lower, remained elevated by historical standards. However, the decline has been enough to remove some incentives from the market that tenants enjoyed prior to the October survey. Since the 2009 fall survey, landlords and property owners have adjusted monthly rents and offered various incentives to attract tenants, as alternatives in the secondary rental market and among other purpose-built rental units were readily available.”143

Across Albertaʼs urban centres, the Calgary CMA had the third highest average two-bedroom rent in October 2010 after Wood Buffalo ($2,210 per month) and Cold Lake ($1,094 per month). According to the CMHC, the average two-bedroom monthly rent in the Calgary CMA varied among different zones, ranging from a low of $921 per month in Other Centres (Zone 10) to $1,173 in Downtown (Zone 1).144

Building Permits

The value of building permits issued in Calgary totaled $849 million in the third quarter of 2010 ($509.5 million in residential and $339.7 million in non-residential), down 20 per cent from the previous quarter. The value of building permits was also down 3 per cent compared to the same quarter of 2009. The value of residential permits was down 27 per cent from the previous quarter and down 11 per cent year-over-year. The value of non-residential permits declined 6 per cent from the previous quarter, but was up 12 per cent compared with the third quarter of 2009.

Nationally, municipalities issued $3.9 billion worth of building permits in November 2010. The total value of building permits was down in 19 of the 34 census metropolitan areas across Canada in November 2010. The largest declines occurred in Vancouver, Toronto and St. Johnʼs. In contrast, Montreal, Victoria and Gatineau registered gains in building permits.

“In Vancouver, building permits fell in both the residential and non-residential sectors, with the multi-family dwellings accounting for 70% of the drop. In Toronto, the decline came mostly from lower intentions for commercial buildings. In St. John's, the decrease was attributable to fewer permits for institutional buildings. Building permits in Montréal increased in every component except for commercial buildings. The increase in Victoria and Gatineau came from the non-residential sector, led by commercial buildings.”145

142 Canada Mortgage and Housing Information, Rental Market Outlook — Calgary CMA, Fall 2010. 143 Ibid. 144 Ibid. 145 Statistics Canada, The Daily, Building Permits, January 10, 2011.



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In November 2010, Calgary builders took out $242.2 million in building permits, down 3 per cent from the previous month. While the value of residential permits increased 14 per cent from the previous month, this increase was not able to offset the declines registered in non-residential permits, which declined by 26 per cent month-over-month.

Figure 22: Value of Building Permits - Calgary CMA

Source: Statistics Canada, CANSIM Table No: 260003

Non-Residential Building Construction

Investment in non-residential building construction in the Calgary CMA totaled $875 million in the final quarter of 2010, down 7 per cent from the previous quarter. On an annual basis, non-residential construction investment in the fourth quarter was also down 14 per cent compared to the same quarter of 2009.146

Half of the 34 census metropolitan areas in Canada recorded year-over-year gains in non-residential construction investment in the fourth quarter, while the other half posted declines. Investment in non-residential building construction across all municipalities in Canada totaled $7.9 billion in the final quarter of 2010, up 1.5 per cent from the previous quarter and up 3.4 per cent year-over-year.

“It was the third consecutive quarterly increase and largely reflected higher spending on commercial building construction. Spending on the industrial component increased slightly, while investment in the institutional component edged down.”147

146 Statistics Canada, The Daily, Investment in non-residential building construction Fourth Quarter 2010, January 17,

2010. 147 Ibid.



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Office Market

Over the four quarters of 2010, Canadaʼs office markets continued on a path towards recovery. This has been demonstrated by ever decreasing vacancy rates and an upward pressure in rental rates across the nation. Calgary has been a major influence in this growth as all types of commercial real estate have continued to show growth through the end of 2010.

As the economic recovery has taken hold and markets have become more stable, many firms have renewed prior plans for office space growth or relocation that were halted as the economy slowed in 2009. The office market in Calgary is no exception, and there has been a widespread move to higher quality space. In 2010, vacancies in class A and AA buildings have declined sharply while class B and C buildings continue to see increasing vacancies. It is expected this activity along with renewed corporate growth will push average rental rates up.148

Calgary has several office buildings that are currently in the construction phase. When two particular buildings (Eighth Avenue Place and The Bow) are completed, vacancy for the entire market is forecast to increase to 10.7 per cent by the end of 2011, from 9.8 per cent in the third quarter of 2010. As corporations continue to relocate as a result of new space becoming available, vacancy is expected to further increase in 2012.149

Recovering consumer confidence has resulted in current retailers expanding to new locations and international retailers looking to open locations across Canada and in Calgary. This trend is forcing the vacancy rate in a downward direction and has been a factor in driving the rent higher for leased retail space. Due to a lack of suitable retail space in Calgary, vacancy rates were held at around 2 per cent over 2010. With a high demand for premium space, it is projected that the rate will stay the same into most of 2011. As a result there are new retail construction projects scheduled for 2011. Retail rents in Calgary average approximately $35 to $45 CAD per square foot (psf) net for new construction and $35 CAD psf net for existing properties. Well-located space can reach as high as $50 CAD psf net.150

The industrial sector was hit hard by the downturn in the economy. With improved economic conditions in 2010, companies are now expanding their operations. The industrial vacancy rate in the third quarter of 2010 was 4.5 per cent in Calgary, well below the national average of 6 per cent.151 This trend is expected to continue as a positive absorption rate is forecast for 2011. Due to a lack of industrial building projects over the recession (which kept the supply constant), the vacancy rate is forecast to go as low as 3.5 per cent by the end of 2011 and rental rates are expected to increase as the market strengthens.152

Major Projects

There were approximately 173 major projects worth $23.7 billion that were either proposed, announced or under construction in Calgary as of October 2010. The project sectors with the greatest value in October were commercial/retail ($7.1 billion), infrastructure ($5.3 billion) and institutional ($3.2 billion). In October, there were also an additional 22 projects worth $2.6 billion on hold in Calgary.

The number of major Calgary projects increased seven per cent from 164 in August 2010 to 173 in October 2010. The total value of these projects also increased by 11 per cent over the same period.

148 Avison Young, Commercial Real Estate: 2010 Annual Review, 2011 Forecast. January 2011, p. 8 149 Ibid, p. 11 150 Ibid, p. 11 151 Ibid, p. 8-11 152 Ibid, p. 11



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Table 11: Calgary Major Projects

(Proposed, Announced or Under Construction)

Project Sector Total Projects Cost ($mill)

Commercial/Retail 26 6,759.9

Commercial/Retail/Residential 4 2,316.0

Infrastructure 52 5,163.5

Institutional 25 3,200.8

Power 3 1,648.0

Residential 40 2,436.2

Tourism/Recreation 23 2,180.2

Total 173 23,704.6

Source: Calgary Economic Development October 2010 Calgary Major Projects

Population

According to the updated City of Calgary 2010 Civic Census, Calgaryʼs population increased from 1,065,455 in April 2009 to 1,071,515 in April 2010.153 This represents an increase of 0.57 per cent from a year earlier, and marks the lowest percentage of growth experienced by Calgary since 1984 when the city experienced a decline in its population.

The City of Calgary expects its population to increase to 1,153,100 persons by 2015 and 1,244,800 persons by 2020.154 This corresponds to an average annual growth rate of 1.4 per cent in the next 10 years. Over the 10-year time period, net migration and natural increase are expected to drive the population growth in Calgary.

The most significant population increase is expected to occur in the 0 to 14, 55 to 64, and 65+ age cohorts. The share of the 0 to 4 age cohort (often referred to as pre-schoolers) in Calgaryʼs total population is expected to increase from 5.9 per cent in 2010 to 6.5 per cent in 2020. While the population of the 5 to 19 age group is expected to increase from approximately 200,000 in 2010 to over 220,000 in 2020, the share of the total population of this group is expected to decline from 18.5 per cent to 17.8 per cent over the same time period.

The labour force replacement ratio, which is defined as the ratio of the 15 to 24 age cohort to the 55 to 64 age cohort, is expected to decline steadily during the forecast period. This means that the growth rate of the 55 to 64 age cohort will outpace that of the 15 to 24 age cohort, and that new entrants to the labour market will be less than the people who leave the labour force.

153 The City of Calgary, Updated 2010 Civic Census Results. 154 The City of Calgary, Population Outlook 2010-2020, August 27,2010.



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Figure 23: City of Calgary Components of Population Increase: 2010 – 2020

Source: City of Calgary, Calgary and Region Economic Outlook: 2010-2020.



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TRENDS IN THE LABOUR MARKET This section examines labour market information for Canada, Alberta, and the Calgary Region. The information provided in this section is based upon Statistics Canadaʼs Labour Force Survey.

CANADA

Q4 2010 The Canadian labour market managed to gain some momentum throughout the fourth quarter of 2010, with employment increasing on a monthly basis by 3,000 in October, by 15,200 in November, and by 22,000 in December. Overall, employment in Canada rose on average by 28,000 in the fourth quarter of 2010 compared to the previous quarter, and by 354,000 (or 2.1 per cent) year over year.

“The December data broke a string of sub par increases in employment, and we expect that this stronger pace will be maintained in 2011. Stronger U.S. growth has brightened the outlook for Canadian exports especially with the latest spurt in U.S. auto sales. The combination of less uncertainty about the outlook outside Canada's borders and still-easy domestic financial conditions set the stage for growth to recover after the lacklustre performance in the second half of 2010.”155

Table 12: Labour Force Survey Statistics - Canada

Canada Oct-10 Nov-10 Dec-10 Q4 2010 Q3 2010

Quarterly

Change Q4 2009

Annual

Change

Population 27,840,400 27,868,900 27,894,200 27,867,800 27,774,800 93,000 27,462,400 405,400

Labour Force 18,698,400 18,654,800 18,674,000 18,675,700 18,701,100 -25,400 18,423,900 251,800

Employed 17,212,700 17,227,900 17,249,900 17,230,200 17,202,200 28,000 16,876,200 354,000

Unemployed 1,485,700 1,426,900 1,424,100 1,445,600 1,499,000 -53,400 1,547,600 -102,000

Participation Rate 67.2% 66.9% 66.9% 67.0% 67.3% -0.3% 67.1% -0.1%

Employment Rate 61.8% 61.8% 61.8% 61.8% 61.9% -0.1% 61.5% 0.4%

Unemployment Rate 7.9% 7.6% 7.6% 7.7% 8.0% -0.3% 8.4% -0.7%

Source: Statistics Canada, Labour Force Survey, seasonally adjusted

155 RBC Economics Research, Daily Economic Update, Canada's unemployment rate held at 7.6% in December,

January 7, 2011.



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Employment conditions are forecast to improve gradually in 2011. According to TD Bank Financial, employers are continuing to meet a modest increase in demand by improving productivity, rather than adding employees.

“We expect to see a lukewarm 250K net new jobs in 2011 across the country, with the Prairies doing much of the heavy lifting. With fiscal austerity just around the corner, we also expect to see public sector employment return to more normal levels. Lastly, headway in further reducing unemployment will be modest given that labour force participation rates are only slowly rising. Put simply, while last yearʼs headline job boom was surprising, the underlying gradual recovery under the surface is less so.”156

Figure 24: Employment in Canada

156 TD Bank Financial, TD Economics, Special Report, National and Provincial Job Markets in 2010, p.4.



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Canadaʼs unemployment rate averaged 7.7 per cent in the fourth quarter of 2010, down from 8.0 per cent the previous quarter and down from 8.4 per cent year over year. For all of 2010, Canadaʼs unemployment rate is estimated to be 8.0 per cent. Scotiabank Group is forecasting Canadaʼs unemployment rate will decline over the next two years, averaging 7.7 per cent in 2011 and 7.5 per cent in 2012.157

“Overall, Canadaʼs performance over the past year has been quite impressive, and 2011 will understandably mark a moderation in pace. However, efforts to improve productivity, diversify markets and to increase workersʼ skills must continue and when coupled with a brightening outlook for the U.S. economy, will help to slowly chip away at unemployment.”158

Figure 25: Unemployment Rate in Canada

Employment by Type of Work, Gender and Age

On a quarterly basis, full-time employment accounted for all of the employment gains in the fourth quarter of 2010. Year over year, however, part-time employment rose by 4.1 per cent (or 130,700) compared to an increase of only 1.6 per cent (or 223,100) for full-time employment.

“Full-time employment is, in most cases, the preferred option for workers when taking into account income stability and the additional benefits provided. It also serves as a barometer for the health of the labour market, as confident firms are more likely to hire on a full-time basis, than those that face uncertainty. While Canada did manage to recover all jobs lost on a net basis, only 54% of the 350,000 full-time jobs lost in 2009 have been regained.”159

157 Scotiabank Group, Global Economic Research, Global Forecast Update, January 7, 2011, p.3. 158 Scotiabank Group, Global Economic Research, Weekly Trends, January 7, 2011, p.4. 159 Ibid.



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Men accounted for over 70 per cent of the employment gains on both a quarterly basis (+19,800) and a yearly basis (+256,100) in the fourth quarter of 2010.

Employment for those aged 55+ was up 1.6 per cent on a quarterly basis in the fourth quarter of 2010, and accounted for all of the employment increase in the quarter (+47,500). Offsetting this gain was a decline in youth employment (-15,500) and a decline in employment for those aged 25 – 54 (-3,900). Year over year, employment growth was the most significant for the 55+ age group in the fourth quarter of 2010 (+7.1 per cent). While employment overall had returned to its pre-recession level of October 2008, that is not the case for all age groups.

“Employment fell steeply during the downturn for youths (15 to 24) and men aged 25 to 54. In October 2010, employment among youths remained 7.8% below its October 2008 level, while the number of workers aged 25 to 54 was just below its pre-recession level (-1.0% for men and -0.7% for women). Workers aged 55 and over, however, experienced employment growth between October 2008 and October 2010, up 13.5% for women and 10.0% for men.”160

Table 13: Employment in Canada by Type of Work, Gender and Age

Canada Oct-10 Nov-10 Dec-10 Q4 2010 Q3 2010

Quarterly

Change Q4 2009

Annual

Change

Employment 17,212,700 17,227,900 17,249,900 17,230,200 17,202,200 28,000 16,876,200 354,000

Full-time 13,909,800 13,898,300 13,936,300 13,914,800 13,811,200 103,600 13,691,700 223,100

Part-time 3,302,900 3,329,600 3,313,500 3,315,300 3,390,900 -75,600 3,184,600 130,700

Men 9,022,600 9,029,200 9,054,500 9,035,400 9,015,600 19,800 8,779,300 256,100

Women 8,190,000 8,198,700 8,195,300 8,194,700 8,186,500 8,200 8,096,900 97,800

15 - 24 years 2,402,700 2,407,500 2,433,900 2,414,700 2,430,200 -15,500 2,388,100 26,600

25 - 54 years 11,804,300 11,812,400 11,812,600 11,809,800 11,813,700 -3,900 11,681,200 128,600

55 years + 3,005,700 3,008,100 3,003,300 3,005,700 2,958,200 47,500 2,807,000 198,700


Employment by Industry

Employment increased in nine industries quarter over quarter, with the largest gains (in numbers) occurring in transportation and warehousing (+29,900) and construction (+23,400). Employment declined in the remaining seven industries in the fourth quarter of 2010, with employment in trade down by 20,500 and employment in professional, scientific and technical services down by 19,300.

On an annual basis, employment increased in ten industries in the fourth quarter of 2010, with natural resources (+9.6 per cent), business, building and other support services (+7.4 per cent) and construction (+6.1 per cent) posting the strongest growth rates.

160 Statistics Canada, The Daily, Labour Force Survey October 2010, November 5, 2010.



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Table 14: Employment in Canada by Industry

Canada Q4 2010 Q3 2010

Quarterly

Change Q4 2009

Annual

Change

All Industries 17,230,200 17,202,200 28,000 16,876,200 354,000

Agriculture 306,000 301,900 4,100 318,800 -12,800

Natural resources 333,000 336,100 -3,100 303,900 29,100

Utilities 150,000 149,200 800 148,500 1,500

Construction 1,259,500 1,236,100 23,400 1,186,800 72,700

Manufacturing 1,759,300 1,749,700 9,600 1,767,300 -8,000

Trade 2,678,100 2,698,600 -20,500 2,640,600 37,500

Transportation & warehousing 841,200 811,300 29,900 810,600 30,600

Finance, insurance, real estate & leasing 1,093,800 1,095,600 -1,800 1,119,900 -26,100

Professional, scientific & technical services 1,280,500 1,299,800 -19,300 1,218,700 61,800

Business, building & other support services 676,500 683,500 -7,000 629,900 46,600

Educational services 1,214,100 1,206,000 8,100 1,223,100 -9,000

Health care & social assistance 2,067,200 2,063,800 3,400 1,972,900 94,300

Information, culture & recreation 774,800 766,500 8,300 779,800 -5,000

Accommodation & food services 1,059,100 1,062,200 -3,100 1,047,100 12,000

Other services 758,200 766,000 -7,800 783,000 -24,800

Public administration 978,700 975,900 2,800 925,300 53,400


Employment in Canada is forecast to increase by 1.1 per cent in 2011 and by 1.9 per cent in 2012. In 2011, all of the industries, with the exception of construction and public administration are projected to contribute to the gain. In 2012, labour conditions in the construction industry are expected to improve and employment in this sector is forecast to grow by 3.1 per cent. Public administration, however, will continue to experience job losses in 2012.161

The primary industries, which include oil and gas, mining, logging and agriculture, are forecast to post above average employment increases over the next two years.

“While a moderate rate of global growth will place limits on how high prices can run-up, ongoing rapid growth in commodity-hungry developing markets point to a supportive price environment for near-term hiring. Long-term expansion in the oil sands is expected to lead the way, while conditions in natural gas improve moderately in 2010. Lastly, agriculture employment is likely to rebound next year from this yearʼs flood-damaged crop. All told, primary industries are expected to contribute about three times their job share in terms of net new employment in 2011-12.”162

161 TD Bank Financial Group, TD Economics, Special Report, Canadian Job Market Outlook by Sector, October 5, 2010. 162 Ibid, p.4.



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Figure 26: Employment Forecast for Canada by Industry for 2011 and 2012 (Q4/Q4)

Source: Forecast by TD Economics as at September 2010.



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ALBERTA

Q4 2010 Following a notable gain of 17,000 jobs in October 2010, Albertaʼs labour market lost its momentum in the final months of the year, with employment declining by 2,400 in November and by another 2,400 in December. Overall, employment in Alberta increased by 13,200 in the fourth quarter of 2010, compared to the previous quarter, averaging 2,018,800. With the majority of Albertaʼs other economic indicators showing positive trends in the fourth quarter of 2010, job creation in the province is expected to pick up in the New Year.

“Employment in Alberta, which lagged behind momentum seen at the national level during 2010, is still just below its pre-recession peak. Looking into 2011, with the oil sector benefiting from strong prices and the economy generally moving in the right direction, it is likely that Alberta will finally regain all the jobs that were lost to the recession.”163

Year over year, employment rose by 32,700 or 1.6 per cent in Alberta in the fourth quarter of 2010.

Table 15: Labour Force Statistics - Alberta

Alberta Oct-10 Nov-10 Dec-10 Q4 2010 Q3 2010

Quarterly

Change Q4 2009

Annual

Change

Population 2,943,400 2,947,200 2,951,100 2,947,200 2,934,900 12,300 2,891,300 55,900

Labour Force 2,150,800 2,138,700 2,135,100 2,141,500 2,140,700 800 2,134,500 7,000

Employed 2,021,200 2,018,800 2,016,400 2,018,800 2,005,600 13,200 1,986,100 32,700

Unemployed 129,500 119,900 118,700 122,700 135,200 -12,500 148,400 -25,700


Employment Rate 68.7% 68.5% 68.3% 68.5% 68.3% 0.2% 68.7% -0.2%



163 ATB Financial, Weekly Economic Bulletin, January 7, 2011, p.1.



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Looking ahead, RBC Economics is forecasting employment growth in Alberta will lead the country in both 2011 and 2012, with growth or 2.3 per cent and 2.4 per cent projected for 2011 and 2012 respectively.

Figure 27: Employment Forecast for Canada and Provinces for 2011 and 2012

(average annual % change)

Source: RBC Economics, Provincial Outlook, December 2010.

Albertaʼs unemployment rate averaged 5.7 per cent in the fourth quarter of 2010, down from 6.3 per cent the previous quarter, and down from 7.0 per cent year over year. The unemployment rate dropped from 6.0 per cent in October 2010 to 5.6 per cent in November (the lowest itʼs been since January 2009), as a result of over 12,000 job-seekers leaving the labour force, and employment remaining virtually unchanged. Year over year, Albertaʼs labour force increased by only 7,000 in the fourth quarter of 2010, despite a population increase of close to 56,000 during the same time period.

“This suggests a couple of things. One is that job-seekers might be growing discouraged and throwing in the towel on looking for work. Another possibility is that interprovincial migration may be once again turning negative in Alberta, something that was happening in late 2009. Workers may believe that job opportunities in other provinces such as Ontario or Saskatchewan are better than they are in Alberta, and leaving the province.”164

In December 2010, unemployment rates declined in half of the provinces (with Saskatchewanʼs and Albertaʼs unemployment rates remaining unchanged). Alberta had the third lowest unemployment rate in December 2010 at 5.6 per cent, following Manitoba (5.2 per cent) and Saskatchewan (5.5 per cent).

164 ATB Financial, Weekly Economic Bulletin, Fewer working, but jobless rate drops, by Todd Hirsch, Senior Economist,

December 3, 2010, p.1.



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Figure 28: Unemployment Rates Q4 2010 (Canada and Provinces)


Employment by Type of Work, Gender and Age

Full-time employment in Alberta accounted for almost all of the employment gain in the fourth quarter of 2010. Full-time employment was up 2.1 per cent year over year, while part-time employment was virtually unchanged. Men accounted for almost three-quarters of the employment increase in the fourth quarter of 2010, with employment for men increasing 2.3 per cent year over year, and employment for women increasing 1.1 per cent.

Adults aged 25 – 64 accounted for 90 per cent of the employment gain in the fourth quarter of 2010. Youth employment, however, declined by close to 1,000 year over year. In December 2010, the unemployment rate in Alberta for those aged 15 – 24 was 9.6 per cent (10.9 per cent for males and 8.1 per cent for females), compared to 4.8 per cent for those aged 25 and over (4.9 per cent for males and 4.6 per cent for females). Employment for seniors aged 65+ increased by 4,600 or 8.1 per cent in the fourth quarter of 2010.

A recent study by Statistics Canada titled, “Labour Market Activity Among Seniors”, found that senior men and women in the highest and lowest levels of the family income distribution were more likely to be employed than those in the middle. Seniors in the highest income group, however, were more likely to work part-time than those in the lowest income group. Seniors with an outstanding mortgage and those with higher levels of education were also more likely to be employed. The most common occupation among woman aged 65+ was retail salesperson, while the most common occupation among senior men was farmer.165

165 Statistics Canada, The Daily, Labour Market Activity Among Seniors, July 21, 2010.



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Table 16: Employment in Alberta by Type of Work, Gender, and Age (unadjusted)


Annual

Change

Employment 2,015,900 2,012,900 2,013,300 2,014,000 1,979,100 34,900

Full-time 1,647,200 1,653,600 1,643,800 1,648,200 1,613,600 34,600

Part-time 368,700 359,300 369,500 365,800 365,400 400

Men 1,103,400 1,104,900 1,106,300 1,104,900 1,079,900 25,000

Women 912,500 908,000 907,000 909,200 899,100 10,100

15 - 24 years 296,100 301,300 305,300 300,900 301,800 -900

25 - 64 years 1,659,700 1,649,600 1,646,600 1,652,000 1,620,700 31,300

65 years + 60,200 62,000 61,300 61,200 56,600 4,600

Source: Statistics Canada, Labour Force Survey, unadjusted

Employment by Industry

Employment increased in 9 of 18 industries in Alberta year over year in the fourth quarter of 2010, with the most notable increases (in numbers) seen in mining and oil and gas (+22,000), construction (+17,700) and health care and social assistance (+17,000). The remaining industries recorded employment losses, with information, culture and recreation employment declining by 10,800 and educational services employment decreasing by 10,600. Employment in Albertaʼs accommodation and food services sector was also down 7.0 per cent on an annual basis in the fourth quarter of 2010.

Table 17: Employment in Alberta by Industry (unadjusted)


Annual

Change

All Industries 2,015,900 2,012,900 2,013,300 2,014,000 1,979,100 34,900

Agriculture 50,300 49,700 44,400 48,100 52,900 -4,800

Forestry and logging with support activities 3,900 2,500 3,100 3,200 1,800 1,400

Mining and oil and gas extraction 142,700 145,200 152,400 146,800 124,800 22,000

Utilities 18,200 19,500 19,400 19,000 20,900 -1,900

Construction 223,700 221,800 207,500 217,700 200,000 17,700

Manufacturing 121,600 121,700 124,500 122,600 119,000 3,600

Wholesale trade 72,100 80,500 88,000 80,200 79,200 1,000

Retail trade 233,100 229,100 225,700 229,300 221,400 7,900

Transportation & warehousing 97,200 102,400 106,300 102,000 102,500 -500

Finance, insurance, real estate and leasing 106,500 103,300 97,900 102,600 104,500 -1,900

Professional, scientific & technical services 144,700 143,400 152,400 146,800 144,400 2,400

Business, building & other support services 80,000 70,400 72,600 74,300 65,200 9,100

Educational services 129,900 131,300 128,300 129,800 140,400 -10,600

Health care and social assistance 221,300 225,700 216,400 221,100 204,100 17,000

Information, culture & recreation 70,300 71,000 69,100 70,100 80,900 -10,800

Accommodation & food services 118,100 112,800 119,000 116,600 125,300 -8,700

Other services 98,500 97,600 103,800 100,000 103,400 -3,400

Public administration 83,800 85,000 82,600 83,800 88,000 -4,200

Source: Alberta Employment and Immigration, Labour Force Statistics, Alberta



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Employment by Occupation

Employment increased in 7 of 10 occupations in Alberta on an annual basis in the fourth quarter of 2010, with the most significant gains (in numbers) occurring in trades, transport and equipment operator occupations (+16,200) and social science, education, government and religion occupations (+15,000). Job losses occurred in natural and applied sciences occupations, art, culture, recreation and sport occupations, and sales and service occupations.

Table 18: Employment in Alberta by Occupation (unadjusted)


Annual

Change

All Occupations 2,015,900 2,012,900 2,013,300 2,014,000 1,979,100 34,900

Management 166,200 166,100 161,100 164,500 161,900 2,600

Business, finance and administrative 340,600 349,700 355,000 348,400 347,600 800

Natural & applied sciences & related 151,000 154,600 155,000 153,500 163,100 -9,600

Health 115,800 124,200 123,800 121,300 109,800 11,500

Social science, education, government & religion 168,100 158,700 160,700 162,500 147,500 15,000

Art, culture, recreation & sport 40,300 40,000 36,600 39,000 42,900 -3,900

Sales & service 477,600 467,900 469,700 471,700 479,000 -7,300

Trades, transport & equipment operators & related 378,700 381,600 388,200 382,800 366,600 16,200

Unique to primary industry 113,500 106,500 98,700 106,200 99,800 6,400

Unique to processing, manufacturing & utilities 64,300 63,500 64,300 64,000 60,900 3,100

Source: Alberta Employment and Immigration, Labour Force Statistics, Alberta



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CALGARY CENSUS METROPOLITAN AREA (CMA)

Q4 2010 Employment in the Calgary CMA declined on both a quarterly (-6,000) and an annual basis (-9,900) in the fourth quarter of 2010, averaging 692,500. For 2010 as a whole, employment increased year over year in health care and social assistance, trade, manufacturing and construction. The mining and oil and gas industry, finance, insurance, real estate and leasing industry, and professional, scientific and technical services industry experienced job losses.166

Table 19: Labour Force Statistics - Calgary CMA

Calgary CMA Oct-10 Nov-10 Dec-10 Q4 2010 Q3 2010

Quarterly

Change Q4 2009

Annual

Change

Population 1,000,100 1,001,500 1,002,800 1,002,800 996,500 6,300 980,300 22,500

Labour Force 743,300 737,200 737,000 737,000 748,900 -11,900 755,100 -18,100

Employed 694,200 691,900 692,500 692,500 698,500 -6,000 702,400 -9,900

Unemployed 49,100 45,300 44,500 44,500 50,300 -5,800 52,600 -8,100


Employment Rate 69.4% 69.1% 69.1% 69.2% 70.1% -0.9% 71.7% -2.5%


Source: Statistics Canada, Labour Force Survey, seasonally adjusted (3 month moving average)

Calgaryʼs unemployment rate averaged 6.3 per cent in the fourth quarter of 2010, down from 6.7 per cent the previous quarter and down from 7.0 per cent year over year. Declines in both the labour force and employment caused the unemployment rate to fall.

“Total employment in Calgary is slowly recovering from losses experienced between April 2009 and June 2010. Although firming crude oil prices brought more optimism to the investments in oil sands, prolonged low natural gas prices caused some shut-ins in the natural gas sector and consequently lay-offs in the Professional, Scientific and Technical Services, and Mining and Gas and Oil Extraction industries.”167

Among the 15 metropolitan areas shown in the following chart, seven had an unemployment rate of 6.0 per cent and under in December 2010, including Calgary (6.0 per cent) and Edmonton (5.8 per cent). Vancouver was the only western city with an unemployment rate above 6.0 per cent in December 2010. Windsor had the highest unemployment rate in the country at 10.8 per cent, while Regina held the spot for the lowest unemployment rate at 4.6 per cent.

166 City of Calgary, November 2010 Labour Market Review, December3 2010, p.1. 167 Ibid.



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Figure 29: Unemployment Rates of Canadian Cities (CMAs)—December 2010

Calgaryʼs participation rate168, which is the percentage of the population 15 years+ that is either employed or actively looking for employment, fell below 74 per cent in November and December 2010. The last time Calgaryʼs participation rate was below 74 per cent was November 2005. Edmontonʼs participation rate rose to 71.7 per cent in December 2010, from 71.2 per cent the previous month. Calgaryʼs participation rate reached an all-time high in November 2008 at 78.2 per cent, while Edmontonʼs participation rate reached its peak in June 2009 at 73.7 per cent.

Figure 30: Labour Force Participation Rates - Calgary CMA and Edmonton CMA

168 Total labour force expressed as a percentage of the population aged 15 years and over.



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Despite the decline in Calgaryʼs participation rate in December 2010, Calgary continued to have the highest rate among metropolitan areas in Canada. Among the 15 metropolitan areas shown in the following chart, Windsor had the lowest participation rate in December 2010 at 61.3 per cent.

Figure 31: Participation Rates of Canadian Cities (CMAs) - December 2010



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CALGARY & AREA EMPLOYER SURVEY For each quarter of 2010, a survey was conducted of Calgary and area companies. The purpose of the survey was to gather information from employers on their recruitment and retention practices and various other employment issues they are facing. In the first quarter of 2010, large-sized companies with 100 or more employees were surveyed and in the second quarter of 2010, medium-sized companies with 50 – 99 employees were surveyed and reported on. Companies with 10 – 49 employees were surveyed in the third quarter, and companies with less than 10 employees were surveyed in the fourth quarter.

Q4 2010 SURVEY RESULTS: MICRO-SIZED COMPANIES (<10 EMPLOYEES) In the fourth quarter of 2010, a survey was conducted of 207 Calgary and area micro-sized companies. It should be noted that results are presented as received, with no statistical analysis. For additional information on survey methodology, see Appendix A.

Profile of Companies

The 207 companies surveyed employ approximately 842 people. Of this total, 69 per cent are full-time employees, 22 per cent are part-time employees, eight per cent are contract workers, and one per cent are seasonal workers.

Table 20: Number of Employees and Companies Surveyed in Q3 2010

IndustryTotal

Employees

Number of

Companies

Mining & Oil & Gas 80 20Construction 81 20Manufacturing 81 21Wholesale & Retail Trade 93 20Transportation & Warehousing 86 21Professional, Scientific & Technical Services 63 21Health Care & Social Assistance 107 20Accommodation & Food Services/Arts & Entertainment 84 21Finance, Insurance, Real Estate & Leasing 81 20Other 86 23

Total 842 207

Note: “Other” represents companies from the remainder of the industry categories: Agriculture, Utilities, Information and Culture, Management of Companies, Administrative and Support Services, Other Services, and Public Administration.



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Business Activity

For companies surveyed in Q4 2010, the same number of companies downsized as expanded in the year prior to their survey, a slight improvement from the Q4 2009 results.

Companies were asked questions about their past and future business activity. Specifically, they were asked if their company expanded or downsized in the 12 months prior to their survey, and if they anticipated a business expansion or downsize in the 12 months following their survey.

Fourteen per cent of the companies surveyed in Q4 2010 expanded in the 12 months prior to their survey and 14 per cent downsized, resulting in a neutral balance of opinion.169 In Q4 2009, 18 per cent of the companies expanded in the 12 months prior to their survey and 20 per cent downsized, resulting in a balance of opinion of -2 per cent.

More companies expanded than downsized in Q4 2010 in four of the 10 industry categories. On balance, 26 per cent of the companies in the ʻotherʼ industry category, 15 per cent of the finance, insurance, real estate and leasing and health care and social assistance organizations, and 5 per cent of the wholesale and retail trade companies expanded in the 12 months prior to their survey. More companies downsized than expanded in the mining and oil and gas, construction, transportation and warehousing, and accommodation and food services/arts and entertainment industries. For the manufacturing and professional, scientific and technical services industries, the balance of opinion was neutral in Q4 2010, meaning the same percentage of companies expanded and downsized in the year prior to their survey. Past Business ActivityPercentage of companies that expanded or downsized in the 12 months prior to their survey

Expanded Downsized Balance Expanded Downsized BalanceOverall Results 18% 20% -2% 14% 14% 0%

Results by IndustryMining & Oil & Gas 10% 43% -33% 5% 30% -25%Construction 14% 38% -24% 15% 30% -15%Manufacturing 14% 14% 0% 5% 5% 0%Wholesale & Retail Trade 4% 26% -22% 20% 15% 5%Transportation & Warehousing 15% 15% 0% 5% 10% -5%Professional, Scientific & Technical Services 35% 17% 17% 10% 10% 0%Health Care & Social Assistance 20% 5% 15% 15% 0% 15%Accommodation & Food Services/Arts & Entertainment 9% 14% -5% 5% 19% -14%Finance, Insurance, Real Estate & Leasing 19% 14% 5% 30% 15% 15%Other 36% 18% 18% 35% 9% 26%

Q4 2009 Q4 2010

Comments

• We have both expanded and downsized in the last twelve months. – Wholesale & Retail Trade

• Because of the economic times we have cut some staff. – Transportation & Warehousing

• We have not brought new people in because of clientele; they are not as busy as they used to be. – Transportation & Warehousing

169 Percentage of companies reporting an expansion minus percentage of companies reporting a downsize.



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• Twelve months ago we downsized. Now there is an expansion only because we are increasing from the downsize. – Construction

• Business has gone down in the last year because there are fewer events. – Accommodation & Food Services/Arts & Entertainment

• We downsized in the first half of the last twelve months and now we are expanding. – Other

The balance of opinion on future business activity was less positive for companies surveyed in Q4 2010, compared to the previous year.

Twenty-three per cent of the companies surveyed in Q4 2010 anticipated a business expansion in the 12 months following their survey and four per cent anticipated a downsize, for a positive balance of opinion of 19 per cent. These results are slightly less positive compared to Q4 2009, when 26 cent anticipated a business expansion, and three per cent anticipated a downsize, for a positive balance of opinion of 23 per cent.

More companies anticipated a business expansion than a downsize in the year following their survey in all of the industry categories in Q4 2010. The construction, wholesale and retail trade and ʻotherʼ industries were particularly positive about future business activity, with a balance of opinion of 30 per cent or more. Future Business ActivityPercentage of companies that anticipated an expansion or downsize* in the 12 months following their survey

Expansion Downsize Balance Expansion Downsize BalanceOverall Results 26% 3% 23% 23% 4% 19%

Results by IndustryMining & Oil & Gas 20% 5% 15% 20% 15% 5%Construction 35% 10% 25% 30% 0% 30%Manufacturing 14% 0% 14% 14% 5% 10%Wholesale & Retail Trade 18% 0% 18% 30% 0% 30%Transportation & Warehousing 15% 5% 10% 19% 0% 19%Professional, Scientific & Technical Services 45% 5% 41% 19% 5% 14%Health Care & Social Assistance 25% 5% 20% 20% 5% 15%Accommodation & Food Services/Arts & Entertainment 14% 5% 9% 5% 0% 5%Finance, Insurance, Real Estate & Leasing 38% 0% 38% 25% 0% 25%Other 33% 0% 33% 48% 9% 39%* includes anticipated closures

Q4 2009 Q4 2010

Comments

• We have just been sold. We are going from a public to a private entity. – Mining & Oil & Gas

• We are getting busier, but we are not expanding. – Construction

• Things are not good right now. – Construction

• It will stay the same, however, I am looking to sell my company. – Manufacturing

• I am looking to close down the business and retire. I was actually thinking of closing the business 2-3 years ago. Things economically have not been doing well. – Manufacturing

• I am trying to avoid closure with the tax changes (with regards to casual labour). Our revenues are also down 30 per cent with the strength of the Canadian dollar. I am getting hit everywhere. – Accommodation & Food Services/Arts & Entertainment

• I have had to reinvent and reposition the business. – Other



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Employment: Past Layoffs, Vacant Positions, and Future Employment

In Q4 2010, significantly fewer companies reported they laid off employees in the three months prior to their survey, compared to the previous year.

Six per cent of the companies surveyed in Q4 2010 reported they laid off workers in the three months prior to their survey.170 Approximately 23 people were reported as being laid off. In Q4 2009, 18 per cent said their company had laid off a total of 63 workers in the three months prior to their survey. One-fifth of the mining and oil and gas companies surveyed in Q4 2010 laid off workers in the three months prior to their survey, down from 35 per cent in Q4 2009. None of the companies from the professional, scientific and technical services industry and the finance, insurance, real estate and leasing industry reported they laid off employees, an improvement from the previous year.

Comments

• Our company had to lay off six people in Canada, but not in Calgary. – Manufacturing

• We are trying to find more workers and keep what we have. We have not seen a slow down. We diversified and changed to keep up with the market. – Manufacturing

• Six months ago we did lay off employees, but not in the past three months. – Construction

In Q4 2010, the percentage of companies that had vacant positions that needed to be filled was up only slightly from the previous year.

Fifteen per cent of the companies surveyed in Q4 2010 said they had vacant positions that needed to be filled at the time of their survey, compared to 13 per cent of the companies surveyed in Q4 2009. With the exception of the transportation and warehousing and accommodation and food services/arts and entertainment industries, the percentage of companies that had vacant positions was either the same as the previous year, or increased in all of the industries year over year.

In Q4 2010, the companies reporting vacancies reported a total of 55 positions that needed to be filled, which was close to the 53 vacancies reported by companies the previous year. Overall, this equates to a vacancy rate of 6.5 per cent for Q4 2010. Vacancy rates for Q4 2010 ranged from a low of 3.7 per cent in the finance, insurance, real estate and leasing industry, to a high of 10 per cent in the mining and oil and gas industry.

170 As a result of the slowdown in the economy.

Past LayoffsPercentage of companies that laid off employees in the three months prior to their survey

Q4 2009 Q4 2010

Overall Results 18% 6%

Results by IndustryMining & Oil & Gas 35% 20%Construction 30% 5%

Manufacturing 24% 5%Wholesale & Retail Trade 23% 5%Transportation & Warehousing 5% 5%Professional, Scientific & Technical Services 14% 0%Health Care & Social Assistance 5% 5%Accommodation & Food Services/Arts & Entertainment 10% 5%Finance, Insurance, Real Estate & Leasing 10% 0%Other 24% 9%

Vacant PositionsPercentage of companies that had vacant positions that needed to be filled

Q4 2009 Q4 2010






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Q4 2010 Vacancy Rates

IndustryTotal Vacant

Positions

Total

Employees

Vacancy

Rate

Mining & Oil & Gas 8 80 10.0%

Construction 7 81 8.6%

Manufacturing 7 81 8.6%

Wholesale & Retail Trade 6 93 6.5%

Transportation & Warehousing 5 86 5.8%

Professional, Scientific & Technical Services 3 63 4.8%

Health Care & Social Assistance 7 107 6.5%

Accommodation & Food Services/Arts & Entertainment 4 84 4.8%

Finance, Insurance, Real Estate & Leasing 3 81 3.7%

Other 5 86 5.8%

Total 55 842 6.5%

Mining & Oil & Gas –Vacant Positions

NOC Code OccupationVacant

Positions

8232 Oil and Gas Well Drillers, Servicers, Testers and Related Workers 8

Total 8

Construction – Vacant Positions


Positions

7272 Cabinetmakers 4

7291 Roofers and Shinglers 2

0711 Construction Manager 1

Total 7

Manufacturing – Vacant Positions


Positions

7272 Cabinetmakers 2

7265 Welders and Related Machine Operators 1

9619 Other Labourers in Processing, Manufacturing and Utilities 1

6411 Sales Representatives - Wholesale Trade (Non-Technical) 1

5241 Graphic Designers and Illustrators 1

7313 Refrigeration and Air Conditioning Mechanics 1

Total 7

Wholesale & Retail Trade – Vacant Positions


Positions

6421 Retail Salespersons and Sales Clerks 2

4163 Business Development Officers & Marketing Researchers & Consultants 1

7452 Material Handlers 1

7411 Truck Drivers 1

1211 Supervisors, General Office and Administrative Support Clerks 1

Total 6



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Professional, Scientific & Technical Services – Vacant Positions


Positions

1411 General Office Clerks 1

2131 Civil Engineers 1

2282 User Support Technicians 1

Total 3

Transportation & Warehousing – Vacant Positions


Positions


1111 Financial Auditors and Accountants 1

1471 Shipper/Receiver 1

Total 5

Health Care & Social Assistance – Vacant Positions


Positions

1453 Customer Service, Information and Related Clerks 2

1221 Administrative Officers 1

1414 Receptionists and Switchboard Operators 1

3235 Other Technical Occupations in Therapy and Assessment 1

6471 Visiting Homemakers, Housekeepers and Related Occupations 1

4214 Early Childhood Educators and Assistants 1

Total 7

Accommodation & Food Services/Arts & Entertainment & Recreation – Vacant Positions


Positions

7414 Delivery and Courier Service Drivers 2

6483 Groomers and Animal Care Workers 1

5212 Technical Occupations Related to Museums and Art Galleries 1

Total 4

Finance, Insurance, Real Estate & Leasing – Vacant Positions


Positions

1224 Property Administrators 1

1435 Collectors 1

1235 Assessors, Valuators and Appraisers 1

Total 3

Other – Vacant Positions


Positions


0911 Manufacturing Managers 1

2175 Web Designers and Developers 1

1424 Telephone Operators 1

Total 5



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The balance of opinion on future employment was slightly less positive for companies surveyed in Q4 2010, compared to 2009.

Thirteen per cent of the companies surveyed in Q4 2010 anticipated total employment would increase in the three months following their survey and three per cent anticipated employment would decrease, for a positive balance of opinion of 10 per cent. These results are slightly less positive compared to Q4 2009, when 12 per cent of the companies on balance anticipated employment would increase.

In Q4 2010, the construction industry was particularly positive about future employment levels, with 30 per cent of the companies anticipating an increase in employment in the three months following their survey. This was a significant improvement over Q4 2009, when the balance of opinion on future employment was -5 per cent. Companies from the manufacturing and accommodation and food services/arts and entertainment industries were neutral on balance about future employment levels. Future EmploymentPercentage of companies that anticipated an increase or decrease in total employment in the 3 months following their survey

Increase Decrease Balance Increase Decrease BalanceOverall Results 16% 4% 12% 13% 3% 10%

Results by IndustryMining & Oil & Gas 5% 0% 5% 5% 0% 5%Construction 10% 15% -5% 30% 0% 30%Manufacturing 14% 5% 10% 5% 5% 0%Wholesale & Retail Trade 14% 0% 14% 20% 5% 15%Transportation & Warehousing 15% 10% 5% 14% 10% 5%Professional, Scientific & Technical Services 32% 0% 32% 10% 0% 10%Health Care & Social Assistance 5% 5% 0% 5% 0% 5%Accommodation & Food Services/Arts & Entertainment 14% 5% 10% 5% 5% 0%Finance, Insurance, Real Estate & Leasing 24% 0% 24% 10% 0% 10%Other 24% 5% 19% 26% 9% 17%

Q4 2009 Q4 2010

Comments

• We cannot afford having two more employees, so I will probably be the only employee in the next few months, depending on how things go. – Transportation & Warehousing

• We wonʼt be recruiting for work in Calgary specifically, but up north in Fort McMurray we will be. – Construction.



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Temporary Foreign Workers

The percentage of companies employing temporary foreign workers in Q4 2010 was unchanged from the previous year at 4 per cent.

Four per cent of the companies surveyed in Q4 2010 reported they employed 14 temporary foreign workers, unchanged from Q4 2009. Approximately 10 per cent of the mining and oil and gas, health care and social assistance, and ʻotherʼ organizations surveyed in Q4 2010 employed temporary foreign workers, while five per cent of the wholesale and retail trade and accommodation and food services/arts and entertainment companies reported they employed temporary foreign workers.

In Q4 2010, the percentage of companies anticipating hiring temporary foreign workers in the year following their survey was similar to the previous year.

Three per cent of the companies surveyed in Q4 2010 anticipated applying for or hiring approximately 10 temporary foreign workers in the 12 months following their survey, virtually unchanged from Q4 2009. In Q4 2010, 10 per cent of the wholesale and retail trade companies anticipated hiring temporary foreign workers in the year following their survey, up from 0 per cent in Q4 2009.

Comments

• We have tried and it has been a nightmare. The process was too frustrating so we gave up. – Manufacturing

• If we get more projects, there is a possibility, but we are not sure yet. – Mining & Oil & Gas

• I did consider it before, especially when it was busy, but I am not sure now. – Construction

• We are trying right now but we are running into difficulties because we do a lot of travel. The Labour Market Opinions (LMOs) are saying there are a lot of qualified employees in Calgary. – Construction

• Maybe not in the next twelve months, but farther down the road we may. – Manufacturing

• I would if there wasnʼt so much red tape. – Health Care & Social Assistance

Temporary Foreign WorkersPercentage of companies that employed temporary foreign workers at the time of their survey

Q4 2009 Q4 2010




Future Temporary Foreign WorkersPercentage of companies that anticipate applying for or hiring temporary foreign workersin the 12 months following their survey

Q4 2009 Q4 2010


Results by IndustryMining & Oil & Gas 0% 0%Construction 0% 5%Manufacturing 0% 0%Wholesale & Retail Trade 0% 10%Transportation & Warehousing 5% 0%Professional, Scientific & Technical Services 0% 0%Health Care & Social Assistance 0% 5%Accommodation & Food Services/Arts & Entertainment 5% 5%Finance, Insurance, Real Estate & Leasing 5% 0%Other 5% 4%



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Recruitment Methods

Word of mouth was the most commonly used recruitment method in Q4 2010.

Overall, the most commonly used recruitment method for companies surveyed in Q4 2010 was word of mouth/employee referrals, followed by walk-ins/unsolicited resumes, the Internet, company website/internal postings, and newspapers.

In Q4 2009, the top recruitment method was word of mouth (85%), followed by walk-ins/unsolicited resumes (57%), newspapers (33%), the Internet (31%), and company website/internal postings (27%).

Comments

• It is pretty specialized what we do. We normally just go through word of mouth or referrals of people that we know and that also know the industry. – Transportation & Warehousing

• Typically in our business we just hire through word of mouth or referrals. – Transportation & Warehousing

• We used to have employees, maybe 8-10 a while back, but now it is just my son and I running the company. – Transportation & Warehousing

• We havenʼt hired or looked to hire anyone in a very long time. – Transportation & Warehousing

• It is mainly just through word of mouth. We donʼt recruit through any other way. – Transportation & Warehousing

• Most of the people here have worked together for at least five years and it is the same employees. My boss prefers stability and we usually donʼt hire anyone we do not know. – Construction

• I have a set group of people that I call when I need more people. – Construction

• I usually hire subcontractors but that is mainly through word of mouth. – Construction

• Mainly just family and friends that work for me, so no recruitment methods are used. – Manufacturing

• I just have family members that work part-time for me. – Manufacturing

• I have had the same employees with me forever and I am not looking to hire. – Accommodation & Food Services/Arts & Entertainment

• I have a core group of guys that I normally go to for work. We typically try to go with people that we trust and know. – Accommodation & Food Services/Arts & Entertainment

• I have not looked for a person for a while. I have had the same employees for the last seventeen years. – Finance, Insurance, Real Estate & Leasing



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Recruiting Difficulties

In Q4 2010, the percentage of companies having difficulty recruiting qualified employees declined only slightly from the previous year.

Companies were asked questions regarding past and future recruiting difficulties. Specifically, they were asked if they had difficulty recruiting qualified employees in the 12 months prior to their survey, and if they anticipated having more, less or the same amount of difficulty recruiting qualified employees in the following 12 months.

Seventeen per cent of the companies surveyed in Q4 2010 reported having difficulty recruiting qualified employees in the 12 months prior to their survey, down slightly from Q4 2009 when 19 per cent reported having difficulty. Thirty-five per cent of the wholesale and retail trade companies surveyed in Q4 2010 had difficulty recruiting compared to only 5 per cent of the mining and oil and gas companies.

Comments

• We deal with a lot of young kids but not qualified people; we canʼt pay [qualified people]. – Wholesale & Retail Trade

• We canʼt find the person we are looking for; [the position] is so specific and we havenʼt been able to fill it with the right person. – Wholesale & Retail Trade

• I think it is the economy. I did radio ads to fill a sales position that I had and I was shocked at the amount of resumes that I got, which was only four. I thought that I would have more. – Wholesale & Retail Trade

• There is a lack of people with transportation experience. – Transportation & Warehousing

• The quality of candidates is poor. – Transportation & Warehousing

• Reliable people are hard to find. – Transportation & Warehousing

• Basically I guess applicants over estimate their qualifications and salary compensation. They arenʼt even qualified, and the qualified ones arenʼt committed. – Construction

• Finding a good labourer at a reasonable price is difficult. – Construction

• The biggest reason was the slow down in the economy. I havenʼt been able to guarantee stable work, and it has only been part-time. – Construction

• Just finding good guys to stick around here. Our difficulty is more people being able to afford housing to stay here. A one-bedroom apartment here is $1,500. – Construction

• Weʼre agriculture and manufacturing and we are competing with the oil field. We get people but we lose them to the oil field really quick, we canʼt compete with their wages. – Manufacturing

• It is difficult finding someone with the skill and flexibility of hours. – Accommodation & Food Services/Arts & Entertainment

Difficulty RecruitingPercentage of companies that had difficulty recruiting in the 12 months prior to their survey

Q4 2009 Q4 2010






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• I had a lot of emails; apparently a lot of people want to work in an art gallery. – Accommodation & Food Services/Arts & Entertainment

• We are losing people to B.C. in this industry. Because we are not busy it is okay, but when we get busy it will be an issue. – Accommodation & Food Services/Arts & Entertainment.

• It is difficult finding people that we would have ʻno problemsʼ with. – Finance, Insurance, Real Estate & Leasing

• At our location a lot of people are transient, so finding long-term solutions is hard. – Finance, Insurance, Real Estate & Leasing

• We are having difficulty finding someone who is flexible. – Health Care & Social Assistance

• There just arenʼt many people with the detailed knowledge for the coding work that we need in Calgary. We have to go out of the city. – Other

On balance, the companies surveyed in Q4 2010 anticipate having about the same amount of difficulty recruiting qualified employees over the next 12 months.

Six per cent of the companies surveyed in Q4 2010 anticipated having more difficulty recruiting qualified employees in the 12 months following their survey and 8 per cent anticipated having less difficulty, for a balance of opinion of -2 per cent.171 In Q4 2009, 15 per cent of the companies on balance anticipated having less difficulty recruiting qualified employees in the 12 months following their survey.

In Q4 2010, companies in the mining and oil and gas, construction, accommodation and food services/arts and entertainment, and ʻotherʼ industries, on balance, anticipated having less difficulty recruiting qualified employees in the year following their survey. Overall, 5 per cent of the companies in the transportation and warehousing and finance, insurance, real estate and leasing industries anticipated having more difficulty recruiting in the 12 months following their survey. Future Recruiting DifficultiesPercentage of companies that anticipated having more or less difficulty recruiting qualified employees in the 12 months following their survey

More Less Balance More Less BalanceOverall Results 5% 20% -15% 6% 8% -2%

Results by IndustryMining & Oil & Gas 5% 20% -15% 5% 10% -5%Construction 0% 35% -35% 5% 10% -5%Manufacturing 10% 5% 5% 14% 14% 0%Wholesale & Retail Trade 0% 18% -18% 5% 5% 0%Transportation & Warehousing 5% 10% -5% 5% 0% 5%Professional, Scientific & Technical Services 14% 32% -18% 10% 10% 0%Health Care & Social Assistance 5% 10% -5% 5% 5% 0%Accommodation & Food Services/Arts & Entertainment 5% 24% -19% 0% 5% -5%Finance, Insurance, Real Estate & Leasing 10% 24% -14% 10% 5% 5%Other 0% 24% -24% 0% 13% -13%

Q4 2009 Q4 2010

171 Percentage of companies that anticipated having more difficulty recruiting qualified employees in the 12 months

following their survey minus the percentage of companies that anticipated having less difficulty.



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Comments

• More - I think with the market picking up, there will be more competition and we are very specialized. – Mining & Oil & Gas

• Likely less. For this particular business we usually hire quite a bit of international crew and there is a lot of people available. – Finance, Insurance, Real Estate & Leasing

• I think it will be more difficult to get experienced people in certain areas. Like, for pilots we are okay, but for the technicians I can see that hiring them will be difficult as we progress into the future. There arenʼt as many young people entering the technician field. – Transportation & Warehousing

• It just seems like the economy is picking up and there is less and less qualified tradesmen out there. – Construction

• I have noticed that there have been more people looking for work lately. – Construction

• There are a lot of people available now because other places are laying off people. – Construction

• I donʼt think that the economy is coming back; I find that I get more resumes walking in now than I did a few years ago. – Manufacturing

• Weʼre a grey haired industry and many are retiring and no young ones are coming in. - Manufacturing

• Iʼm not looking to hire new employees in the next 12 months; in fact Iʼm thinking of closing down the business. – Manufacturing

• We are not as busy as we were a few years ago. – Professional, Scientific & Technical Services

• More difficult, simply because of the experienced knowledge base required. – Professional, Scientific & Technical Services

• I think that everyone is keeping their jobs now and they arenʼt wandering as much. – Health Care & Social Assistance

• I think it is getting easier. I think a lot of small business or self-employed people have businesses and are looking for more secure employment. – Other

Employee Turnover and Turnover Rates

The percentage of companies reporting employee turnover declined in Q4 2010.

Twenty-eight per cent of the companies surveyed in Q4 2010 reported employees had left their company in the 12 months prior to their survey as a result of voluntary turnover172, compared to 35 per cent of the companies in Q4 2009.

In Q4 2010, 55 per cent of the wholesale and retail trade companies and half of the construction companies reported employees had voluntarily left in the year prior to their survey, compared to 19 per cent of the manufacturing, professional, scientific and technical services, and accommodation and food services/arts and entertainment companies.

172 Initiated by the employee.

Employee TurnoverPercentage of companies with voluntary employee turnover in the 12 months prior to their survey

Q4 2009 Q4 2010


Results by IndustryMining & Oil & Gas 30% 25%Construction 25% 50%Manufacturing 29% 19%Wholesale & Retail Trade 45% 55%Transportation & Warehousing 20% 24%Professional, Scientific & Technical Services 27% 19%Health Care & Social Assistance 65% 25%Accommodation & Food Services/Arts & Entertainment 48% 19%Finance, Insurance, Real Estate & Leasing 29% 20%Other 33% 26%



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Overall, the turnover rate was over 16 per cent for companies surveyed in Q4 2010.

The companies surveyed in Q4 2010 reported approximately 136 employees left their companies in the 12 months prior to their survey as a result of voluntary turnover. This equated to a turnover rate of 16.2 per cent. In Q4 2009, companies reported a total of 122 employees left their companies in the 12 months prior to their survey, resulting in a turnover rate of 13.1 per cent. In 2010, the construction (40%), wholesale and retail trade (23%) and accommodation and food services/arts and entertainment industries (21%) had the highest turnover rates on average, while the professional, scientific and technical services and finance, insurance, real estate and leasing industries had the lowest turnover rates at under eight per cent.

On balance, the companies surveyed in Q4 2010 anticipate employee turnover will be lower over the next 12 months.

One per cent of the companies surveyed in Q4 2010 anticipated voluntary turnover would be higher in the 12 months following their survey and 7 per cent anticipated it would be lower, for a balance of opinion173 of -6 per cent. In Q4 2009, 2 per cent anticipated turnover would be higher in the year following their survey and 15 per cent anticipated it would be lower, for a balance of opinion of -13 per cent.

In Q4 2010, all of the industries surveyed on balance, (with the exception of manufacturing and accommodation and food services/arts and entertainment) anticipated voluntary turnover would be lower in the year following their survey. The balance of opinion on future employee turnover for the manufacturing and accommodation and food services/arts and entertainment industries was neutral, suggesting organizations in these industries anticipate turnover will be about the same over the next year.

173 Percentage of companies that anticipated voluntary turnover would be higher in the 12 months following their survey

minus the percentage of companies that anticipated voluntary turnover would be lower.

Employee TurnoverTurnover rates of companies (total turnover divided by total employees)in the 12 months prior to their survey

Q4 2009 Q4 2010

Overall Results 13.1% 16.2%

Results by IndustryMining & Oil & Gas 7.1% 12.5%Construction 12.7% 39.5%Manufacturing 8.2% 11.1%Wholesale & Retail Trade 15.1% 22.6%Transportation & Warehousing 7.4% 15.1%Professional, Scientific & Technical Services 10.1% 6.3%Health Care & Social Assistance 22.7% 15.0%Accommodation & Food Services/Arts & Entertainment 28.0% 21.4%Finance, Insurance, Real Estate & Leasing 9.6% 7.4%Other 11.0% 8.1%



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Future TurnoverPercentage of companies that anticipated employee turnover would be higher or lower in the 12 months following their survey

Higher Lower Balance Higher Lower BalanceOverall Results 2% 15% -13% 1% 7% -6%

Results by IndustryMining & Oil & Gas 0% 10% -10% 0% 5% -5%Construction 0% 20% -20% 0% 10% -10%Manufacturing 0% 5% -5% 5% 5% 0%Wholesale & Retail Trade 5% 23% -18% 0% 10% -10%Transportation & Warehousing 5% 5% 0% 5% 10% -5%Professional, Scientific & Technical Services 5% 23% -18% 0% 5% -5%Health Care & Social Assistance 0% 5% -5% 0% 15% -15%Accommodation & Food Services/Arts & Entertainment 0% 19% -19% 0% 0% 0%Finance, Insurance, Real Estate & Leasing 0% 29% -29% 5% 10% -5%Other 5% 10% -5% 0% 4% -4%

Q4 2009 Q4 2010

Comments

• We have a core of people that we keep and these people have been with the company for many years. – Mining & Oil & Gas

• I am anticipating the economy will improve in the spring and so turnover will be higher. – Transportation & Warehousing

• We are trying hard to make it lower. We are trying to restructure the company so that it is more attractive to stay longer. – Manufacturing

• Lower - people are hungry and really looking for work. – Professional, Scientific & Technical Services

• Lower - one person that left started his own company and took five people with him. – Health Care & Social Assistance

• Lower –we are selling more, getting more customers and getting better brands and deals. – Other

Retention

A positive work environment was the most commonly used retention strategy in Q4 2010.

Companies were asked questions regarding current and future employee retention activities. Specifically, they were asked what strategies were their companies using to retain employees, and did they anticipate their company would be focusing more, less or the same on employee retention in the 12 months following their survey.

Overall, the most commonly used retention strategy for companies surveyed in Q4 2010 was a positive work environment, followed by interesting/challenging work, a competitive salary, and excellent communication. In Q4 2009, a positive work environment also topped the list, followed by excellent management/supervision, excellent communication, and a competitive salary.



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Comments

• We used to have a reward and recognition program, but we did away with it because of the downsizing in our company. – Mining & Oil & Gas

• We have a daily meeting where we discuss issues and concerns. – Transportation & Warehousing

• Our salary is competitive for our industry, but is not competitive with the salaries in the oilfields. We are limited in what we can do. – Manufacturing

• We are flexible but it depends on the workload. A specific example I can give you is our last day is the 17th of December and we are back on the 4th of January and all the Christmas off is paid. That wonʼt be holiday time it will be time off with full salary, opposed to cash bonuses. – Professional, Scientific & Technical Services

In Q4 2010, fewer companies on balance anticipated they would be focusing more on employee retention in the next year, compared to 2009.

Overall, 14 per cent of the companies surveyed in Q4 2010 anticipated they would be focusing more on employee retention in the 12 months following their survey. This compares to a balance of opinion174 of 17 per cent for companies surveyed in Q4 2009.

In Q4 2010, 30 per cent of the health care and social assistance organizations, 20 per cent of the mining and oil and gas and finance, insurance, real estate and leasing companies and 17 per cent of the companies in the ʻotherʼ industry category anticipated they would be focusing more on employee retention in the year following their survey. Future RetentionPercentage of companies that anticipated they would be focusing more or less on employee retentionin the 12 months following their survey

More Less Balance More Less BalanceOverall Results 18% 1% 17% 14% 0% 14%

Results by IndustryMining & Oil & Gas 15% 0% 15% 20% 0% 20%Construction 10% 0% 10% 10% 0% 10%Manufacturing 14% 0% 14% 14% 5% 10%Wholesale & Retail Trade 18% 0% 18% 15% 0% 15%Transportation & Warehousing 25% 0% 25% 10% 0% 10%Professional, Scientific & Technical Services 18% 5% 14% 0% 0% 0%Health Care & Social Assistance 20% 0% 20% 30% 0% 30%Accommodation & Food Services/Arts & Entertainment 10% 0% 10% 5% 0% 5%Finance, Insurance, Real Estate & Leasing 24% 5% 19% 20% 0% 20%Other 29% 0% 29% 17% 0% 17%

Q4 2009 Q4 2010

174 Percentage of companies anticipating they would be focusing more on employee retention in the 12 months following

their survey minus the percentage of companies anticipating they would be focusing less.



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Supplemental Question

The economy was the most important issue or challenge mentioned by companies in Q4 2010.

Companies were asked what the single most important issue or challenge their company is currently facing. The economy was the top response, followed by attracting new customers/getting more work, competition, access to capital/financing/funding, and managing growth.

Comments

• I see fleets of idle trucks and signs that say trucks are for sale because of lost contracts – there are companies and people out there that are hurting. It is interesting times, but those that prepare when times are good are the ones that can ride through. – Transportation & Warehousing

• People over 55 years of age are out of luck because there is not much out there. – Transportation & Warehousing

• Unfortunately I am in the business and the stuff that we sell is luxury commodities. When the economy is bad we get hit harder. – Accommodation & Food Services/Arts & Entertainment

• The original core value of the company was special effects for film, television and stage. We found stage is stable but film and television in Alberta is non-existent compared to ten years ago. The summer and fall of 2009 was the slowest for film and television. This year has been better but not great. We found that there is a small and dedicated industry of professionals in Alberta that really make film and television. There just arenʼt that many shows being shot in Alberta and not many coming into Alberta to shoot films - a lack of production. – Accommodation & Food Services/Arts & Entertainment

• We are focusing on improving our website and advertising in the American market. – Finance, Insurance, Real Estate & Leasing



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JOB BANK ANALYSIS This section provides a summary of jobs posted to the Job Bank in the fourth quarter of 2010.

CALGARY (CITY) For Calgary (city), there were 9,735 unique job postings on the Job Bank in the fourth quarter of 2010, advertising for a total of 22,305 positions. Sixty-three per cent of the job postings were from companies located in South Calgary, while the remaining 37 per cent of the job posting were from companies located in North Calgary.

Figure 32: Job Bank: Job Ad Postings in Calgary (city) by Quadrant

Forty-two per cent (9,289 positions) were sales and service occupations, and 27 per cent (5,932 positions) were trades, transport and equipment operator occupations.

Figure 33: Job Bank: Number of Job Positions in Calgary (city) by Occupation for Q4 2010



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The top 5 occupations advertised on the Job Bank in the fourth quarter of 2010 for Calgary (city) were food counter attendants, kitchen helpers and related occupations (2,240 positions), retail salespersons and sales clerks (1,080 positions), truck drivers (940 positions), cooks (918 positions), and material handlers (736 positions).

Table 21: Calgary (city) Positions175

NOC Code Occupation Positions

6641 Food Counter Attendants, Kitchen Helpers and Related Occupations 2,240

6421 Retail Salespersons and Sales Clerks 1,080


6242 Cooks 918


7611 Construction Trades Helpers and Labourers 714

6212 Food Service Supervisors 641

6453 Food and Beverage Servers 519

6661 Light Duty Cleaners 506

6474 Babysitters, Nannies and Parents' Helpers 480


8612 Landscaping and Grounds Maintenance Labourers 368

7284 Plasterers, Drywall Installers and Finishers and Lathers 345


6651 Security Guards and Related Occupations 305

0621 Retail Trade Managers 300

6623 Other Elemental Sales Occupations 294

7414 Delivery and Courier Service Drivers 260

6611 Cashiers 251

7271 Carpenters 247

7421 Heavy Equipment Operators (Except Crane) 237

1411 General Office Clerks 229

7246 Telecommunications Installation and Repair Workers 208

3413 Nurse Aides, Orderlies and Patient Service Associates 207


1471 Shippers and Receivers 191

1414 Receptionists and Switchboard Operators 186

0611 Sales, Marketing and Advertising Managers 184

4212 Community and Social Service Workers 181

2242 Electronic Service Technicians (Household and Business Equipment) 177

6233 Retail and Wholesale Buyers 167

1474 Purchasing and Inventory Clerks 157

4214 Early Childhood Educators and Assistants 149

6471 Visiting Homemakers, Housekeepers and Related Occupations 144

6663 Janitors, Caretakers and Building Superintendents 142

6662 Specialized Cleaners 135

7265 Welders and Related Machine Operators 132

6211 Retail Trade Supervisors 128

6465 Other Protective Service Occupations 127

7321 Automotive Service Technicians, Truck Mechanics and Mechanical Repairers 127

0631 Restaurant and Food Service Managers 125

2133 Electrical and Electronics Engineers 125

7312 Heavy-Duty Equipment Mechanics 125

175 Only occupations with 125 or more positions are shown in the table.



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COMMUNITIES SURROUNDING CALGARY For the communities surrounding Calgary, there were 1,756 unique job postings on the Job Bank in the fourth quarter of 2010, advertising for a total of 4,264 positions. Forty-five per cent (1,900 positions) were sales and service occupations, and 24 per cent (1,038 positions) were trades, transport and equipment operator occupations.

Figure 34: Job Bank: Number of Job Positions by Occupation for Q4 2010

Communities Surrounding Calgary

The top 5 occupations advertised on the Job Bank in the fourth quarter of 2010 for the communities surrounding Calgary were food counter attendants, kitchen helpers and related occupations (376 positions), babysitter, nanny and parent helper occupations (290 positions), retail salespersons and sales clerks (240 positions), truck drivers (216 positions) and cooks (177 positions).



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Table 22: Communities Surrounding Calgary Positions176


6641 Food Counter Attendants, Kitchen Helpers and Related Occupations 376

6474 Babysitters, Nannies and Parents' Helpers 290



6242 Cooks 177

9617 Labourers in Food, Beverage and Tobacco Processing 137



8232 Oil and Gas Well Drillers, Servicers, Testers and Related Workers 114

7611 Construction Trades Helpers and Labourers 112

6623 Other Elemental Sales Occupations 83


6611 Cashiers 76

9462 Industrial Butchers and Meat Cutters, Poultry Preparers and Related Workers 71

7291 Roofers and Shinglers 70

8432 Nursery and Greenhouse Workers 67

8431 General Farm Workers 64

1122 Professional Occupations in Business Services to Management 62

7443 Automotive Mechanical Installers and Servicers 57


0621 Retail Trade Managers 51


7292 Glaziers 48

7441 Residential and Commercial Installers and Servicers 48

8611 Harvesting Labourers 48

7421 Heavy Equipment Operators (Except Crane) 42


6651 Security Guards and Related Occupations 34

6221 Technical Sales Specialists - Wholesale Trade 33

6662 Specialized Cleaners 30

2231 Civil Engineering Technologists and Technicians 29


7312 Heavy-Duty Equipment Mechanics 28

1475 Dispatchers and Radio Operators 26

7621 Public Works and Maintenance Labourers 26

7242 Industrial Electricians 25

8612 Landscaping and Grounds Maintenance Labourers 25

2242 Electronic Service Technicians (Household and Business Equipment) 24

1471 Shippers and Receivers 23

8253 Farm Supervisors and Specialized Livestock Workers 23

0631 Restaurant and Food Service Managers 22

7231 Machinists and Machining and Tooling Inspectors 22

7322 Motor Vehicle Body Repairers 22

8256 Supervisors, Landscape and Horticulture 21

8615 Oil and Gas Drilling, Servicing and Related Labourers 21

7246 Telecommunications Installation and Repair Workers 20

7321 Automotive Service Technicians, Truck Mechanics and Mechanical Repairers 20

9212 Supervisors, Petroleum, Gas and Chemical Processing and Utilities 20

9612 Labourers in Metal Fabrication 20

176 Only occupations with 20 or more positions are shown in the table.



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BANFF/CANMORE AREA For the Banff/Canmore area, there were 582 unique job postings on the Job Bank in the fourth quarter of 2010177, advertising for a total of 1,455 positions. Sales and service occupations dominated the Job Bank in the fourth quarter of 2010 accounting for three-quarters of the total positions. Occupations in art, culture, recreation and sport accounted for approximately 13 per cent of the total positions.

Figure 35: Job Bank: Number of Positions by Occupation for Q4 2010

Banff/Canmore Area

The top 5 occupations advertised on the Job Bank in the fourth quarter of 2010 for the Banff/Canmore area were light duty cleaners (286 positions), program leaders and instructors in recreation and sport (171 positions), food counter attendants, kitchen helpers and related occupations (163 positions), cooks (119 positions) and food and beverage servers (101 positions).

177 Job Bank data is provided weekly. For December 2010, data was only available for three weeks in the month.



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Table 23: Banff/Canmore Area Positions178



5254 Program Leaders and Instructors in Recreation and Sport 171

6641 Food Counter Attendants, Kitchen Helpers and Related Occupations 163

6242 Cooks 119


6241 Chefs 64

6441 Tour and Travel Guides 50


6435 Hotel Front Desk Clerks 38


6211 Retail Trade Supervisors 28

6663 Janitors, Caretakers and Building Superintendents 22

6682 Ironing, Pressing and Finishing Occupations 20

Job ad data is available each week for the Job Bank.179 Since July 21 2009, job postings for Calgary and surrounding area varied from a low of 1,240 postings the week of January 5, 2010 to a high of 2,753 postings the week of August 31, 2010. Job postings for Banff/Canmore area varied from a low of 71 postings the week of December 1, 2009 to a high of 251 postings the week of April 20, 2010.

Figure 36: Number of Job Postings on the Job Bank per week

178 Only occupations with 20 or more positions are shown in the table. 179 Total job postings are all unduplicated postings appearing in the Job Bank each week. This figure includes postings

from the previous weeks that have been reposted as well as new job postings.



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APPENDIX A

SURVEY METHODOLOGY The Q4 2010 Calgary and Area Employer Survey is based on responses to a telephone questionnaire conducted in November and December 2010. The survey sampled 207 Calgary and area companies with <10 employees. Following are the number of respondents from each industry sector included in the sample:

IndustryNumber of

Respondents

Mining & Oil & Gas 20Construction 20Manufacturing 21Wholesale & Retail Trade 20Transportation & Warehousing 21Professional, Scientific & Technical Services 21Health Care & Social Assistance 20Accommodation & Food Services/Arts & Entertainment 21Finance, Insurance, Real Estate & Leasing 20Other 23Total 207

The ʻOtherʼ industry category includes a variety of companies from the remainder of the industry categories: Agriculture, Utilities, Information & Culture, Management of Companies, Administrative & Support Services, Educational Services, Other Services and Public Administration.

It should be noted that the method of sample selection provides a good cross-section of opinion. Nevertheless, given the size of the sample, the statistical reliability of the survey is limited, particularly when the data is reported by industry. The value of this survey, however, goes beyond the data captured by the questionnaire. The telephone interview allows companies to expand on their responses, which provides invaluable information and comments that cannot be measured quantitatively.

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