Brace yourselves for more job losses in Alberta’s oil and gas sector, economist says

Jul 03, 2015

A torrent of layoffs in Alberta’s energy sector appears to have slowed as 2015 hits the halfway mark but more job losses may be around the corner, an economist warns.

“I think we are probably over the hump of the majority of layoffs but I don’t think it’s quite over yet,” Todd Hirsch, chief economist at ATB Financial, said this week.

“Over the summer months we will see, I think, a few more probably big announcements and some more layoffs in that oil and gas sector.”

Thousands of Albertans lost their jobs in the first six months of 2015. The cuts were deepest in the energy sector, as oil producers, drilling contractors and service companies reacted to the sharp decline in oil prices that started last fall.

Prices for benchmark West Texas Intermediate crude oil fell from $107 US per barrel in June 2014 to less than $50 in January, and dipped below $50 a second time in March. Workforce reductions — sometimes called “organization rightsizing” — have been widespread.

Suncor Energy, one of the first major oil producers to announce cutbacks, said in January it would trim 1,000 people from its staff. As recently as late June, TransCanada Corp. laid off 185 people, most Calgary-based.

But sectors outside energy haven’t been immune. Nearly 2,000 Alberta workers lost their jobs after U.S. retailer Target decided to close all of its Canadian stores.

The job losses don’t tell the whole story, as employment in Alberta actually grew by 38,000 jobs between May 2014 and May 2015, according to Statistics Canada.

But the unemployment rate edged up to 5.8 per cent in May and is expected to creep higher. Hirsch predicts it will average six per cent for the year.

“That means over the summer and early fall it’s going to crest well above six per cent, and I think Albertans need to prepare themselves for that.”

Many job losses have been linked to delays or deferrals of capital projects in the oilsands. The Canadian Association of Petroleum Producers predicted this month that total capital investment this year in the oil and natural gas industry will be $45 billion, down nearly 40 per cent from $73 billion in 2014. In the oilsands, capital investment is expected to be $23 billion this year, down from $33 billion in 2014.

The Canadian Association of Oilwell Drilling Contractors has said the downturn could cost 25,100 drilling jobs.

And the Petroleum Labour Market Information (PetroLMI) Division of Enform has predicted that oil industry spending cuts could see the Canadian economy lose up to 185,000 direct and indirect jobs this year and next — more than two-thirds of them in Alberta.

“We’re certainly seeing a reflection of the reduction in jobs in other industries, not just the oil and gas industry,” said PetroLMI director Carol Howes.

Some companies have started taking steps to retain employees through shorter work weeks and other “creative ways,” Howes said. “At some point, whether they can continue to do that will be another question.”

By law, Alberta employers planning to terminate 50 or more workers at a single location within a four-week period must notify the government in advance.

Numbers compiled by Alberta Jobs, Skills, Training and Labour show that between Jan. 1 and June 24, 65 group termination notices have affected 10,597 workers.

That compares to 7,508 workers affected by group terminations in all of 2014, and 4,186 in 2013.

The bulk of group layoffs came in the year’s first three months. Between January and March, 43 group terminations affected 8,170 workers. Since then, 22 have affected 2,427 employees.

Seventy-one per cent of employees affected by group terminations this year worked in the energy sector. The rest, including 1,962 Target employees, were in the retail and food sector.

Hirsch said oil prices will continue to influence employment levels in the second half of the year.

Oil has traded around the $60 US mark for the past two months but “the market is still quite jittery about what’s going on,” he said, adding he’s not convinced oil has yet found its bottom.

“I don’t like to suggest to Albertans that this is pleasant,” he said. “But it’s also pretty normal, and I hope people take a little bit of comfort in the fact this isn’t unusual.”

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