Alberta, the home of Canada's oil sands, is going through its worst downturn in activity on record as a prolonged period of low oil prices and the wildfires earlier this year buffet the provincial economy.
According to Toronto-Dominion Bank's economics team, the cumulative annual percentage contraction in real output projected for 2015 to 2016 exceeds even the financial crisis, as well as the last supply-side driven crash in oil prices in the mid-1980s, in magnitude:
While the recent episode seems poised to be the worst single recession on record, the two recessions in the 1980s mean that stretch "is still likely to be regarded as the most challenging period in the post-war period in Alberta," says a TD team led by Deputy Chief Economist Derek Burelton.
However, TD's team notes that labor market indicators point to a more mild downturn.
"Periods of boom followed by bust are no strangers to an economy that is tied to the vagaries of the global oil market," write the economists. "The current recession is expected to yield a cumulative annual decline in real GDP of around 6.5 percent, which is more than twice that of the average of past downturns."
While economic activity appeared to be picking up earlier this year, the wildfires that wreaked havoc in the region and disrupted oil operations threw a wrench in the province's nascent comeback story.
The economists note that the softness in the Canadian dollar and low interest rates helped Alberta's economy escape an even worse fate.
But while these dynamics have acted as a cushion for the economy in the bad times, they're unlikely to be a springboard for the province going forward.
"To the extent that these factors have been blunting the downside, the recovery anticipated in Alberta starting next year is likely to lack the typical punch that has characterized those in the past," conclude the economists.