Despite Black Shoots in Oil Patch, Canada Faces a Jobs Mirage

  • Exports of heavy crude hit record 396,000 barrels in November
  • Labor market indicators show more jobs but less quality

Before crude prices crashed in 2014, it wasn’t unusual to see groups of boisterous, beer-drinking rig workers in the Edmonton International Airport’s departure lounge waiting to board the red-eye flight home to Canada’s east coast from jobs in northern Alberta.

While there’s less exuberance nowadays, the midnight ‘‘Oil-Patch Express’’ still operates. A recent visit by a Bloomberg reporter to the same departures lounge found a more mixed set of passengers that included young couples, some retirees and even parents with a young daughter scampering around in pink pajamas.

Still, oil workers were in the majority. One of them, Kent Austin, 40, is glad to be working again after being laid off last year. “It’s quite a severe impact -- 10 months sitting around doing nothing,” he said. The welding inspector on contract to Calgary-based Pembina Pipeline Corp. was non-committal when asked if there’s a broader recovery underway. “I hope so,” Austin said.

Gary Miller was more upbeat. The 53-year-old pipe fitter fresh off a 14-day job at a Suncor Energy Inc. tank farm said he’s seen two or three major oil-patch projects “on again.” He pointed to the cyclical nature of the work. “There’s some slowdowns. That’s the way it is in natural resources. Mid-2018, things will be busy again.”

Oil-Patch Upswing

In addition to anecdotal evidence, the latest data indicate not only is the worst of the commodity-price shock behind for Canada, but there are discernible signs of a sector on the upswing.

Here are some of the numbers:

  • Shipments of energy products rose to C$8.52 billion ($6.47 billion) in December, the highest since November 2014 and almost double the 2016 low. 
  • Canada exported C$22.7 billion in energy products last quarter, the most since 2014.
  • Heavy crude exports climbed to a record 396,000 barrels a day in November amid rising production, according to the latest National Energy Board data. 
  • Crude by rail exports surged to 120,000 barrels a day, the highest in more than a year, as pipeline capacity grew scarcer.
  • Output in the oil and gas industry in November climbed 6.1 percent from December 2015 levels. That’s four times the pace of growth for the economy as a whole.
  • The number of active drill rigs topped 300 in the last month, almost 50 percent more than a year earlier and approaching 2014 levels. 
  • Suncor’s production jumped to a record 738,500 barrels last quarter.

Jobs Pipeline

That’s just the short-term outlook. The long-term is also beginning to look rosier too.

One of U.S President Donald Trump’s earliest executive orders revived TransCanada Corp.’s Keystone XL pipeline after the project was rejected by President Barack Obama in 2015. In November, Trudeau approved two expanded crude export pipelines -- Kinder Morgan Inc.’s Trans Mountain and Enbridge Inc.’s Line 3. The three pipelines combined represent a $20 billion investment, and will add sufficient capacity to handle about 20 years of expanding oil production in western Canada, according to National Energy Board oil production estimates.

Slack Work

Behind another set of Canada’s surprisingly strong job numbers, cautionary signals abound. Growth in hourly wages is stagnating, with the average rising just 1.0 percent in January from a year earlier, the slowest since 2003. The number of hours worked also pulled back 0.8 percent from a year earlier. That creates a striking divergence between job creation -- the country is adding jobs at the fastest pace since 2010 -- and the quality of those jobs.

Erik Hertzberg/Bloomberg

Part-time jobs accounted for 69 percent of all employment gains in the last year. Temporary work is up 7.3 percent in January from a year earlier, the largest year over year increase since 2010.

Week Ahead

  • Prime Minister Justin Trudeau meets U.S. President Donald Trump on Monday in Washington and German Chancellor Angela Merkel on Friday in Berlin
  • Bloomberg Nanos Consumer Confidence Index (Monday, 10 a.m.)
  • Teranet/National Bank Home Price Index (Tuesday, 8:30 a.m.)
  • Factory sales (Wednesday, 8:30 a.m.); international securities transactions (Friday, 8:30 a.m.)
  • Canadian Real Estate Association existing home sales (Wednesday, 9 a.m.)

Inflation Signal?

Economists looking for even more evidence the Bank of Canada won’t be raising interest rates any time soon found it in a speech last week by Deputy Governor Larry Schembri, who highlighted the recent divergence in the Bank of Canada’s three new core inflation measures. They ranged between 1.4 percent and 2.1 percent in the fourth quarter -- and economists believe that gap may need to narrow before policy makers make any change to interest rates.

“Future potential policy changes in either direction may require all three new core
inflation measures to be going the same direction in synchronous fashion or at
least high conviction at the BOC that they might,” Derek Holt, head of capital markets economics at Bank of Nova Scotia, wrote in a note to clients.

That was echoed by David Rosenberg at Toronto-based Gluskin Sheff & Associates Inc., who wrote Schembri’s comments “add further fodder to the ‘lower for longer’ policy path.”

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