Alberta's economy is reviving but won't rebound to pre-COVID levels until mid-2022, economist says

Alberta's economy is starting to come back to life but isn't expected to rebound to pre-COVID levels until mid-2022, ATB Financial's chief economist says.

Todd Hirsch, who is also the vice-president of the Alberta-owned ATB, was one of the speakers at Wednesday's annual Economic Outlook, hosted by Calgary Economic Development.

He saidAlberta's GDP activity contracted in 2020 by over eight per cent the largest decrease of any province in Canada.

While it rebounded in 2021 by about six per cent and is forecasted to grow again next year by about four per cent, Hirsch said it will still take time to fully recover.

"It doesn't get us out of the hole," Hirsch said.

"That is almost two and a half years of lost growth. So it's understandable [that] a lot of Albertans are still feeling like we are in a recession."

Job market could continue to suffer

Thejob market also remains an issue, with labour shortages in some sectors and the unemployment rate hanging around eight per cent, Hirsch said.

Some employers are having a hard time filling positions, and a mismatch between required skills and those of applicants has continued to present challenges.

"We think it's still going to take probably until mid-2022, or even longer, for the job market to return to something that we would consider, you know, in good shape here," Hirsch said.

However, healso said many sectors are doing well in the province, and cited the technology, agriculture, renewable energy, and film and television industries as examples.

Meanwhile,the role played by the oil and gas sector in the provincial economy has shifted.

"[Oil and gas]is now the backbone of our economy, and you want to take care of your backbone, for sure," Hirsch said.

"But the growth engineis being handed off to other sectors of the economy."

Fostering those other sectors will be imperative, Hirsch said.

"In order to for us to, you know, get through 2022 and beyond, it's going to take some emphasis on those growth sectors while still taking care of our backbone industry."

The sentiment for change and growth was echoed by Calgary Mayor Jyoti Gondek.

"Faced with so many challenges, we must draw upon our unique strengths to chart our own path forward," Gondek said.

"The seeds of our future success lie within the wealth of experience in our energy sector, technology, innovation, small businesses, women-led enterprises and within the art sector."

Inflation a concern for ATB economist

Hirsh said that while he isn't ready to hit the panic button yet, he is concerned that inflation will continue to grow.

His assessment came after Canada's central bank said Wednesday it is keeping its benchmark policy interest rate right where it isbut is signalling that higher rates are coming soon.

The Bank of Canada opted to hold its benchmark rate steady at 0.25 per cent, the same level it has been throughout the pandemic.

While holding that rate steady, the bank madeit clear it's getting ready to raise that rate sooner rather than later, as the cost of living is increasing at a faster pace than expected.

"The main forces pushing up prices higher energy prices and pandemic-related supply bottlenecks now appear to be stronger and more persistent than expected," the bank said.

It added that it now thinksCanada's multi-year high inflation ratewill go higher still topping out at about five per cent, the bank said before coming back down to the range of about two per cent next year.

Hirsh said this could be due to supply issues or a lot of pent-up demand.

"I think that indicates they are no longer looking at this as transitory inflation, that they are now expecting inflation pressures to continue to build," Hirsh said.