Does Alberta really have a growing economy?

The Alberta government recently posted a media release regarding the 2021–2022 annual report. There are a lot of claims in there that I’m not going to address here, but there is one in particular that I’m interested in.

Thanks to a growing economy, strong energy prices late in the fiscal year and a commitment to fiscal discipline, Alberta ended the 2021-22 fiscal year with a surplus of $3.9 billion, the first surplus in seven years.

The statement I want to particularly highlight is “Thanks to a growing economy”.

And I was curious, is Alberta’s economy really growing?

Well, conveniently, the Alberta government has an economic dashboard, which lists multiple metrics to determine economic growth.

Let’s look at a few.

For example, according to the dashboard, the number of businesses incorporated in May 2022 was 4,362, which is up 16.2% since May 2021. Not only that, but it’s at its ninth highest level since at least 1991. Three of the other eight months with higher levels occurred during the UCP’s term.

But there are a couple of caveats here.

First, it’s natural for the number of businesses to increase as the population increases. And the fact that the number of incorporated businesses was at its highest level over 10 years ago, when there were 750,000 fewer people living here than there are now, should cause us to be wary of attributing this year’s growth to UCP policies.

Second, this is the number of incorporating businesses, not the number of operating businesses. This number would include holding companies, which don’t necessarily employ workers or contribute meaningfully to the province’s GDP. Just because it’s a company is incorporated doesn’t mean it’s contributing to the economy.

Oh, here’s another one the UCP like to cite: manufacturing sales.

April 2022’s manufacturing sales numbers were higher not only than they were in April 2021, but also than they have been since the beginning of 1992.

However, keep in mind that this graph tracks sales value, not sales volume. In other words, it shows how much all manufacturing products sold for in any given month, not how many were actually sold.

And while it is possible that Alberta sold 37.6% more manufacturing products in April 2022 than they did the previous April, there are other factors that affect how much something is sold for.

For example, corporate profits factor into the sale price of products. After all, profit is fundamentally what is left over from your revenues once you’ve paid your business expenses. If you charge more for your products than it costs you to produce them, you end up with profit.

Another thing that can drive up total sales costs is inflation. If the cost of your manufacturing inputs (fuel, raw materials, equipment, etc) is higher, then you’ll feel pressure to increase your product prices to cover those cost increases.

Here, let me illustrate. Compare these two charts.

The first graph is the change in the consumer price index from one month to the next, over the last decade. The consumer price index measures the cost of a “basket of goods” purchases by consumers. If CPI increases, we call that inflation.

The second graph shows manufacturing sales over the same period.

Notice anything?

The peaks and valleys in both charts seem to mirror one another over the long run. Or put another way, inflation appears to be correlated with the total value of manufacturing sales.

Unless we have data on how many units were sold—not just how much they were sold for—then it’s really difficult to say whether manufacturing has increased under the UCP.

Same goes for wholesale trade.

Same peaks and valleys as both the manufacturing chart and the inflation chart. Also, it shows sale value not sales volume.

One again, without knowing how many wholesale units have been sold, rather than what they were sold for, it’s hard to definitively say that wholesale trade has increased under the UCP, let alone because of UCP policies.

How about oil production?

Well, in April 2022, Alberta extracted 17.336 million m³ of oil. The previous April, it was 15.776 million m³. That’s a 9.9% increase. And last October, it peaked at an all-time high of 18.917 million m³.

So, that must mean the UCP are doing something right, right?

Well, look at oil production over the last 15 years.

What we see here is that oil production has been trending up for a very long time. In fact, it almost seems as though the graph has levelled off under the UCP. Sure, they hit a new peak, but there were quite a few troughs, too.

The point is that it doesn’t seem as though oil production has increased under the UCP at a rate that was faster than seen under previous governments.

Okay, then, perhaps employment is a better indicator.

Well, in May 2022, there were 2.366 million people working in Alberta. That number was only 2.220 million the year before, which means it’s 6.6% higher than it was a year ago. In fact, this is the highest number of people working in Alberta history.

Or, at least since 1976.

But do you notice anything about that graph?

If we ignore the huge drop in employment caused by the COVID-19 pandemic, we see that the jobs numbers in May 2022 are about where they would be if the pre-pandemic growth had continued. It might even be a bit lower than where it should be.

Take a look at this.

In May 1993, the number of people working in Alberta was 1.283 million. In May 2008, right at the start of the Great Recession, that number was 2.038 million. That’s an increase of 755,000, which works out the be an annual average increase of about 50,000 during that 15-year period.

Between May 2019, the first full month the UCP were in office, and May 2022, the number of workers employed in Alberta went from 2.281 million to 2.366 million. That’s a total increase of 85,000, which works out to an average annual increase of around 28,000.

So, the average annual increase under the UCP is almost half of what it was during the 15 years leading up to the Great Recession. To be fair, it’s still better than the average annual increase of 7,750 we saw under the NDP.

Had employment numbers continued to climb after 2008 as they had during the 15 years leading up to it, there’d have been about 2.738 million people working in Alberta during May 2022, which is about 372,000 more than we actually saw.

Finally, what about the greatest measure of economic activity of them all: GDP?

Unfortunately, the most recent data we have is annual data, not monthly, so we have only until 2021. But it doesn’t look good.

The good news is that Alberta’s GDP in 2021 was higher than it was in 2020. The bad news is that 2020 was in the early stages of the pandemic and GDP for that year was at its lowest level in a decade.

So, even with all the claims of “growing economy”, we’re not producing a whole lot. Of course, maybe that’s changed over the last 6 months. Unfortunately, we won’t know that until December.

And at least one major bank has lowered their GDP forecast this year for Alberta. Last March, TD forecasted GDP to increase by 5.6% this year. Last week, they dropped it slightly to 5.5%.

And last year, Alberta’s GDP increased by only 5.1%.

Either way, any economic growth we are seeing in Alberta appears to be recovery growth or the same growth we’ve been seeing for decades. Alberta’s economy certainly doesn’t appear to be skyrocketing under the UCP.

If anything, Alberta’s economy is more like cruising.

Maybe when they came up with the slogan “Jobs. Economy. Pipeline.”, they meant an economy that was just okay.