Labour Market Report - Alberta...Calgary & Area Labour Market Report - Fourth Quarter 2014 Alberta...

Q4 2014

Calgary & AreaLabour Market Report

............................................................................................................................Introduction 1.............................................................................................................Organization of the Report 1

...............................................................................................................Executive Summary 2.......................................................................................................................The Economy 10

...........................................................................................................................Global Economy 10..............................................................................................................................U.S. Economy 20

......................................................................................................................Canadian Economy 28..........................................................................................................................Alberta Economy 39

.............................................................................................................Calgary Region Economy 52.................................................................................................Trends in the Labour Market 64

...................................................................................Calgary Census Metropolitan Area (CMA) 64..........................................................................................................................................Alberta 65.........................................................................................................................................Canada 68

.........................................................................................Calgary & Area Employer Survey 72..........................................Q4 2014 Survey Results: Micro-Sized Companies (<10 Employees) 72

................................................................................................................Job Bank Analysis 95.................................................................................................................................Calgary (city) 95

..............................................................................................Communities Surrounding Calgary 98...................................................................................................................Banff/Canmore Area 100

.........................................................................................................................Appendix A 102...................................................................................................................Survey Methodology 102

Calgary & Area Labour Market Report - Fourth Quarter 2014

Alberta Human Services

Contents

IntroductionAlberta Human Services provides career and labour market information products and resources, with both a provincial and local/regional focus, in order that Albertans have the skills, supports and information they need to succeed in the labour market.

This report provides labour market information and analysis for use by Albertans in learning about the labour market and career planning; by employers and industry in understanding and addressing labour market issues; and by the Alberta Human Services Calgary Region in strategic planning for programs and services.

Organization of the Report This report contains the following information:

Economic Overview – The Calgary region’s economy is influenced by global economic conditions, and by economic drivers in the Canadian economy and elsewhere in Alberta. This section provides information on economic activity in the fourth quarter of 2014, as well as outlooks (where available) for the global, U.S., Canada, Alberta and Calgary region economies.

Trends in the Labour Market – This section examines labour market information for the Calgary Census Metropolitan Area (CMA), Alberta and Canada.

Calgary and Area Employer Survey – This section highlights findings from a survey conducted in the fourth quarter of 2014 of Calgary and area employers with <10 employees. Results of this survey are compared to the results of a survey conducted in the fourth quarter of 2013 (companies with <10 employees).

Job Bank Analysis – This section provides a summary of jobs posted to the Job Bank in the fourth quarter of 2014.

Disclaimer

Alberta Human Services has made every effort to ensure that the information contained in this report is reliable, but makes no guarantee of its accuracy or completeness. The user of any information in this report accepts full responsibility and risk of loss resulting from decisions made by the user.


Alberta Human Services 1

Executive SummaryThe EconomyGLOBAL ECONOMYReal global economic growth averaged a moderate 3.2 per cent in 2014, and in 2015 this rate is expected to improve only marginally to 3.3 per cent.

The most prominent development in the global economy since mid-2014 has been a slide of more than 50 per cent in the price of crude oil. After reaching a high of more than US$100 per barrel in June 2014, the benchmark price of West Texas Intermediate (WTI) oil fell consistently through the remainder of the year to below US$50. Similarly, the per barrel benchmark price of Western Canada Select (WCS) heavy oil declined from nearly US$90 to less than US$40 over the same period.

The Asia/Pacific region will be among the greatest beneficiaries of reduced global energy prices as these economies as a group consume about 29 million barrels of oil per day and produce just 9 million barrels a day. A large majority of Asian nations import more than half of their oil needs, and countries such as Hong Kong, Singapore, Japan, and South Korea import virtually all of their demand.

Along with lower oil prices, a strong U.S. economy is expected to encourage global growth through 2015 and 2016. On the downside, economic prospects remain subdued in the euro area; China is struggling to limit its slowdown; Japan has entered a recession; and emerging markets face looming interest rate hikes in the U.S. that could result in episodes of currency volatility and capital flight.

While real output growth in the euro area underperformed at 0.7 per cent in 2014, forecasters are cautiously optimistic that the combination of lower energy prices, stronger stability in the banking sector, diminished fiscal austerity and continued policy stimulus on part of the ECB will push growth to 1.0 per cent in 2015 and 1.4 per cent in 2016. These growth rates suggest a gradual improvement in the economic outlook, but are still nowhere near those observed pre-2008.

While China has maintained its position as a global growth leader with real GDP projected to increase by 7.4 per cent in 2014, economic activity is expected to moderate to a more sustainable rate of growth of slightly less than 7.0 per cent in 2015 and 2016.

U.S. ECONOMYThe U.S. economy grew much faster than was anticipated during the third quarter of 2014. Annualized third quarter real GDP growth was estimated at 5.0 per cent – the largest quarterly increase since the third quarter of 2003. While some of this upturn was a continuation of a rebound from the first quarter’s 2.1 per cent weather-related decline, it followed an already-outsized 4.6 per cent real output increase in the second quarter of the year.

Forecasters are generally optimistic that the above-potential U.S. growth observed during the third quarter of 2014 continued into the next, with annualized fourth quarter real GDP growth estimates in the range of 3.0 per cent. Following a volatile 2014 with average annual growth expected to come in at around 2.5 per cent; the U.S. economy is projected to sustain real growth of slightly less than 3.0 per cent into 2015 and 2016.



A larger-than-anticipated employment increase of 252,000 jobs in December 2014 capped a strong year for the U.S. labour market. Nearly three million new jobs were added in 2014 – the best annual performance since the tech boom of 1999. Upward revisions to prior months brought 2014’s fourth quarter average monthly job gain to 289,000 and suggested good momentum heading into 2015.

Along with steady job growth through the fourth quarter of 2014, the U.S. unemployment rate fell by 0.2 points on the month to 5.6 per cent in December 2014– down substantially from 6.7 per cent at the end of 2013 and representing the lowest rate since June 2008.

Despite strengthening labour market conditions in 2014, significant real wage growth has not yet materialized in the U.S.. Average hourly earnings declined by 0.2 per cent in December – the most precipitous monthly drop since the depths of the Great Recession when the jobless rate neared 10 per cent.

Wage growth in the U.S. labour market holds important implications for the Canadian economy, as the lack of any meaningful wage increase has been a motivating factor in the Federal Reserve choosing to postpone raising the federal funds rate from its current near-zero range. Once the federal funds rate begins to increase, which most forecasters expect to occur sometime around mid-2015, it is likely to exert further depreciative pressure on the Canadian dollar – particularly in light of the Bank of Canada’s surprise cut to its key overnight rate in January 2015.

CANADIAN ECONOMYAs oil prices continued their downward trajectory during the fourth quarter of 2014 with no sign of a rebound, forecasters reassessed their oil price projections and the resulting implications to near-term economic growth in Canada. While lower oil prices appear to have had a net neutral effect on GDP growth in 2014, the impact heading into 2015 will be unambiguously negative.

Given its status as a leading producer and exporter of oil, Canada’s economic outlook has weakened with real GDP projected at about 2.0 per cent in 2015, improving slightly to 2.2 per cent in 2016 in line with a projected recovery in energy prices.

Heading into 2015, Canadians should expect to receive some relief from lower gasoline prices. Forecasters estimate that lower prices at the pump will save the average household about $300 in 2015, or the equivalent of $4.0 billion on a national level.

Consumer price inflation is expected to remain relatively resilient even in the prevailing environment of lower gas prices. Canada’s output remains near its potential level, which should apply some upward pressure to price levels. A depreciated Canadian dollar will also make imports relatively more costly, with at least some proportion of these higher prices passed on to consumers. Core inflation is expected to accelerate to an average of about 2.0 per cent in 2015 and 2016, potentially discouraging consumer spending growth.

In late 2014, the impact of lower oil prices was observed through generally dampened levels of business optimism. The Bank of Canada’s Winter Business Outlook Survey suggested that the general outlook, while remaining in positive territory on balance, had moderated significantly relative to prior surveys.



Following surpluses in six of the prior nine months, Canada’s merchandise trade balance deteriorated to a deficit of $600 million in November 2014. Exports fell 3.5 per cent on the month to their lowest level since April 2014, representing the largest monthly decline since the Japanese earthquake and tsunami of February 2011. Imports were also down by 2.7 per cent on the month. Nevertheless, owing to strong gains earlier in 2014, export volumes were still up 5.2 per cent year-over-year in November and remained on track to post its largest contribution to annual GDP since 1999.

The sustained decline in oil prices is likely to temper housing market activity and price growth in Western Canada; and already-elevated price levels in other major markets may have difficulty moving higher. However, a severe downturn is not anticipated on a national level. While activity may be divergent on a regional basis, persistently low borrowing costs, favourable demographics, and stable employment gains should continue to support the housing market through 2015.

The drop in crude oil prices will significantly dampen corporate profits in Canada over the next few quarters. Following a strong 11.6 per cent annualized increase in the third quarter of 2014, pre-tax profits are expected to drop by at least 10 per cent through the fourth quarter of 2014 and the first quarter of 2015. Most of the risk to profits flows to Canadian shareholders since only about 35 per cent of Canada’s energy sector is foreign owned.

There are, however, a number of upside risks to the Canadian economy related to lower oil prices. A stronger U.S. economy and a weakening of the Canadian dollar provide a larger market for Canadian exporters along with enhanced trade competitiveness. Further, cheaper gasoline prices are projected to offset some of the decline in investment through increased retail spending.

The per barrel price of WTI is generally expected to remain subdued at an average of US$47 in 2015, rising to an average of US$65 in 2016. The price of WCS is expected to follow a similar trajectory, with an average discount of about $15 per barrel.

ALBERTA ECONOMYAlberta’s economy grew at a healthy pace in 2014. However, the dramatic drop in crude oil prices since mid-2014 has had forecasters scrambling to lower their growth forecasts for 2015 and 2016.

Preliminary estimates for real GDP growth in Alberta in 2014 average 3.9 per cent, matching the pace of growth in 2013. With the exception of agriculture, output growth is expected to be positive across all major industry categories in 2014, led by transportation and warehousing (+7.5 per cent), mining (+6.5 per cent), wholesale and retail trade (6.2 per cent), construction (+5.9 per cent) and manufacturing (+5.4 per cent).

The Alberta economy is expected to slow substantially in 2015, and there is debate as to whether the province will enter a recession. Real GDP growth forecasts for 2015 range between -0.3 per cent and +0.9 per cent. Alberta’s economic prospects are expected to improve gradually in 2016, with real GDP growth forecasts in the range of 0.9 per cent and 2.3 per cent.

The Canadian Association of Petroleum Producers (CAPP) is projecting a 33 per cent drop in short-term capital spending in 2015. Conventional and oil sands capital investment in Western Canada is forecast to total $46 billion in 2015, down from $69 billion in 2014. Capital spending in Western Canada’s conventional oil and gas sector is projected to decline from $36 billion in 2014 to $21 billion in 2015. In the oil sands, capital investment is expected to decrease from $33 billion in 2014 to $25 billion in 2015.



Oil and gas field activity is also expected to slow. According to the Canadian Association of Oilwell Drilling Contractors (CAODC), the number of active drilling rigs in Western Canada is forecast to drop 41 per cent in 2015, from an average of 370 per day in 2014 to just 203 per day in 2015. Rig utilization is also projected to fall to 26 per cent in 2015, from 46 per cent in 2014.

The CAODC also forecasts a significant decline in employment in the oil patch as a result of decreased drilling activity. Related job losses are projected to reach as high as 23,000 in 2015, reflecting losses of 3,400 direct jobs and 19,500 indirect jobs relative to 2014.

Alberta’s energy exports rose 21 per cent year-over-year to $91.3 billion in 2014, accounting for 75 per cent of the province’s total international merchandise exports. Higher prices and volumes of crude oil exports were the main drivers of Alberta’s energy export growth. In 2014, crude oil exports rose 18 per cent to $76 billion; oil export volumes rose 13 per cent and oil prices rose 5.0 per cent. Export Development Canada (EDC) is forecasting Alberta’s energy export growth to slow to just 3.0 per cent in 2015 due to lower crude prices offsetting gains in trade volume.

Housing starts in Alberta reached 40,590 units in 2014, a 12.7 per cent increase from 2013. Calgary recorded the highest annual growth rate in housing starts in 2014 (+36 per cent), while annual housing starts declined 5.6 per cent in Edmonton and 47 per cent in Wood Buffalo. Alberta housing starts are forecast to decline 11.3 per cent in 2015 to 36,000 units and by an additional 4.2 per cent in 2016 to 34,500 units.

Alberta’s apartment vacancy rate rose to 2.1 per cent in October 2014, from 1.6 per cent in October 2013. The average rental price for a two-bedroom apartment in Alberta rose to $1,238 per month in October 2014, from $1,158 per cent in October 2013.

Alberta led the nation with retail sales growth of over 8.0 per cent in 2014, but the projected slowdown in the provincial economy will have ripple effects. Retail sales growth in Alberta is forecast to moderate significantly to 1.0 per cent in in 2015 and 3.4 per cent in 2016.

The average weekly earnings of payroll employees in Alberta rose by $32 or 2.8 per cent year-over-year in November 2014 to $1,162. On average, Albertans earned $221 more per week in November 2014 than the average Canadian.

Alberta’s population grew by 24,300 in the third quarter of 2014 to an estimated 4,146,000. This was the fifteenth consecutive quarter that the province recorded the highest quarterly population growth rate in the country (+0.59 per cent), just slightly ahead of British Columbia (+0.58 per cent). Canada’s population increased 0.38 per cent on a quarterly basis in the third quarter of 2014.

CALGARY ECONOMYCalgary’s economy expanded by an estimated 4.0 per cent in 2014, up slightly from 3.8 per cent in 2013. Among the 13 census metropolitan areas (CMAs) in the Conference Board of Canada’s latest forecast, Calgary’s economic growth was outpaced in 2014 by Edmonton (+4.9 per cent) and Saskatoon (+4.2 per cent). More moderate growth of 1.5 per cent is projected for the Calgary CMA in 2015.

Plunging oil prices continued to put downward pressure on inflation in Calgary over the final quarter of 2014. Consumer prices in Calgary rose 2.2 per cent in the twelve months to December 2014, following a 2.3 per cent increase the previous month and a significantly higher 3.3 per cent increase in October 2014.



Calgary builders started 3,328 housing units in the fourth quarter of 2014, an 11.3 per cent decline from the final quarter of 2013. In spite of the decline in starts in the final quarter, annual production in 2014 totaled 17,131 units, a 36 per cent increase from the previous year. Total annual housing starts in the Calgary CMA are forecast to decrease 21 per cent in 2015 to 13,600 units. Single-detached starts are expected to decline 6.1 per cent to 6,100 units, while multi-family starts are projected to fall almost 30 per cent to 7,500 units.

Residential sales activity in the city of Calgary declined 7.5 per cent year-over-year in December 2014, which is not unusual around the holiday season according to the Calgary Real Estate Board (CREB). For 2014 as a whole, sales activity increased 9.3 per cent to 25,664 units, from 23,474 units the previous year. The average price of a single-family home in Calgary rose 6.9 per cent annually to $553,147 in 2014.

Looking ahead, existing home sales in Calgary are forecast to decline by 4.0 per cent in 2015 due to decrease in employment growth and net migration levels, market uncertainty and a better supplied rental market. Prices are projected to rise by a modest 1.6 per cent annually over the same time period.

Calgary’s apartment vacancy rate increased to 1.4 per cent in October 2014, from 1.0 per cent the previous year, mainly as a result of an increase in the supply of rental units. Calgary had the second lowest vacancy rate among the major CMAs in Canada in October 2014 behind Vancouver at 1.0 per cent.

The average rental price for a two-bedroom apartment unit in the Calgary CMA rose 8.0 per cent to $1,322 per month in October 2014, from $1,224 per month in October 2013. Among the major metropolitan areas in Canada, Calgary had the highest average rent for a two-bedroom apartment, ahead of Vancouver ($1,311), Toronto ($1,251) and Edmonton ($1,227). Calgary’s apartment vacancy rate is forecast to increase to 2.0 per cent in 2015, with the average rent for a two-bedroom apartment rising to $1,350 per month.

Calgary’s overall office vacancy rate continued to rise in the third quarter of 2014, increasing to 8.6 per cent from 8.3 per cent the previous quarter and 6.6 per cent year-over-year.

Calgary’s population reached 1.195 million in 2014, an increase of 38,500 people year-over-year. This was a record for any 12-month period in the city’s history, representing a 3.3 per cent annual increase. Calgary’s population is forecast to increase by 120,500 over the next four years, reaching a total of 1.316 million by April 2018.

Trends in the Labour MarketCALGARY CMAOn an annual basis, employment in the Calgary CMA increased by 16,800 or 2.1 per cent in the fourth quarter of 2014. The most significant gains in employment year-over-year were in transportation and warehousing, educational services, trade, manufacturing and business, building and other support services. These increases were offset by notable annual losses in accommodation and food services, other services, utilities, information, culture and recreation and construction.

Fourth quarter 2014 job gains resulted in Calgary’s unemployment rate dropping to 4.6 per cent, from 5.1 per cent the previous quarter.



Calgary’s labour force participation rate declined to 73.1 per cent in the final quarter of 2014, from 73.4 per cent the previous quarter. In October 2014, the Calgary CMA’s participation rate dropped below 73 per cent to 72.9 per cent, a rate not seen in approximately 17 years (since August 1997).

While an annual labour force increase of 17,200 in the fourth quarter of 2014 was positive, Calgary’s working age population increased by a much higher 41,600 year-over-year in the fourth quarter of 2014. That means that only 40 per cent of the new working age people to Calgary entered the labour force. This is down significantly from the fourth quarter of 2013, when over three quarters of the new working age people to the city (77 per cent) entered the labour force.

Following estimated employment growth of 2.6 per cent in 2014, employment in the Calgary CMA is forecast to grow by a more modest 0.9 per cent in 2015.

ALBERTAThe fourth quarter of 2014 marked the 18th consecutive quarter of positive job growth in Alberta. Employment in the province increased by 17,000 on a quarterly basis and by 58,300 compared to the fourth quarter of 2013, representing just over one-third of the net new jobs created nationally.

Alberta’s services-producing sector added 49,700 net jobs on an annual basis in the fourth quarter of 2014, led by gains in transportation and warehousing, educational services, professional, scientific and technical services and health care and social assistance. The goods-producing sector also managed a modest employment gain in the final quarter, despite a decline of 15,700 jobs in the forestry, fishing, mining and oil and gas industry. Thanks to solid annual increases in manufacturing and construction , overall employment in the goods-producing sector increased by 8,900 in the fourth quarter of 2014.

Following estimated employment growth of 2.2 per cent in 2014, employment in Alberta is forecast to increase by an average of just 0.3 per cent in 2015.

Alberta’s unemployment rate averaged 4.5 per cent in the fourth quarter of 2014, down from 4.7 per cent the previous quarter and 4.7 per cent year-over-year.

The average duration of unemployment in Alberta held steady at 12.8 weeks in the fourth quarter of 2014. In contrast, at the national level, the average length of unemployment jumped from 17.9 weeks in the third quarter of 2014 to 18.6 weeks in the final quarter of the year.

CANADACanadian employment increased by 80,200 on a quarterly basis in the final quarter of the year, following a gain of 61,400 jobs in the third quarter of 2014. On a year-over-year basis, employment in Canada rose by 171,100 or 1.0 per cent in the fourth quarter of 2014.

The bulk of new jobs nationally were full-time, increasing by 117,200 or 0.8 per cent annually in the final quarter of 2014. However, part-time employment in Canada grew at double the pace (1.6 per cent) of full-time employment.

Across sectors, employment increases were concentrated in the services sector (+130,100) on an annual basis in the fourth quarter of 2014, however goods-producing industries also recorded an increase of 41,400.



Canada’s unemployment rate declined to a relatively low 6.6 per cent in the final quarter of 2014, down from 6.9 per cent the previous quarter and 7.0 per cent in the fourth quarter of 2013. In 2014, Canada’s unemployment rate averaged 6.9 per cent. Forecasts for 2015 are in the range of 6.4 per cent to 6.8 per cent.

Canadian employers had an estimated 247,000 job vacancies in November 2014. With approximately 1.178 million unemployed in the same month, Canada had 4.8 unemployed people for every job vacancy, down from 5.6 in November 2013.

Calgary and Area Employer SurveyThe purpose of the quarterly survey is to gather information from Calgary and area employers on their recruitment and retention practices and various other employment issues they are facing. Over the course of the year, employers will be divided into four categories based on the number of employees in the company and results of the survey will be reported on as follows:

Q1 2014: Large-sized companies with 100+ employees

Q2 2014: Medium-sized companies with 50 – 99 employees

Q3 2014: Small-sized companies with 10 – 49 employees

Q4 2014: Micro-sized companies with <10 employees

Q4 2014 SURVEY RESULTS: MICRO-SIZED COMPANIES (<10 EMPLOYEES) The 200 companies surveyed employ approximately 1,014 people.

On balance, 7 per cent of the employers said their company expanded in the year prior to their survey, up from 2 per cent in 2013.

Twenty-one per cent of the employers anticipate a business expansion in the 12 months following their survey.

Nine per cent of the employers reported they laid off approximately 22 workers in the three months prior to their survey.

Twenty-one per cent of the employers said they had vacant positions that needed to be filled at the time of their survey, down slightly from 25 per cent in 2013. Overall, employers reported they had 75 vacancies that needed to be filled, down slightly from 83 vacancies reported the previous year. This equates to a vacancy rate of 6.9 per cent for Q4 2014.

On balance, 11 per cent of the employers anticipate employment in their company will increase over the next three months.

Seven per cent of the employers reported they employ approximately 23 temporary foreign workers.

Five per cent of the employers anticipate applying for or hiring approximately 23 temporary foreign workers in the 12 months following their survey.

The most commonly mentioned recruitment method for micro-sized employers was word of mouth/employee referrals, followed by career and classified websites, walk-ins/unsolicited resumes and company website/internal postings. Fifteen cent of the employers said they used social media such as Facebook, Twitter, and LinkedIn as a method for recruiting.

Twenty-nine per cent of the employers reported having difficulty recruiting qualified employees in the 12 months prior to their survey.



On balance, 3 per cent of the employers anticipate they will have more difficulty recruiting qualified employees over the next 12 months.

Forty-one per cent of the employers reported employees had voluntarily left their company in the prior year. Overall, the turnover rate was 19 per cent for micro-sized employers.

On balance, 8 per cent of the employers anticipate employee turnover will be lower over the next year.

The most commonly reported retention strategy for micro-sized employers was a positive work environment, followed by excellent management/supervision, competitive salary and interesting/challenging work.

Fifteen per cent of the employers anticipate they will be focusing more on employee retention over the next year.

Fifteen per cent of the employers reported they currently employ persons with disabilities.

Seven per cent (12 employers) reported they proactively recruit persons with disabilities. The top strategy used to proactively recruit persons with disabilities is: we provide alternate work arrangements for persons with disabilities (11 employers), followed by we have made our offices accessible to employees and customers with disabilities (10 employers), we include people with disabilities in our diversity recruitment goals (six employers) and we provide mentorship to job seekers who have disabilities (five employers).

The top challenge employers face when it comes to hiring or employing persons with disabilities relates to the nature of their work.

Job Bank Analysis For Calgary (city), there were 10,261 job postings on the Job Bank in the fourth quarter of 2014,

advertising for a total of 25,815 positions. The top five occupations were food counter attendants, kitchen helpers and related occupations (1,936 positions), cooks (1,292 positions), material handlers (1,204 positions), retail salespersons and sales clerks (1,144 positions) and construction trades helpers and labourers (1,048 positions).

For the communities surrounding Calgary, there were 2,386 job postings on the Job Bank in the fourth quarter of 2014, advertising for a total of 7,242 positions. The top five occupations were industrial butchers and meat cutters, poultry preparers and related workers (655 positions), food counter attendants, kitchen helpers and related occupations (631 positions), cooks (404 positions), truck drivers (339 positions) and food service supervisors (298 positions).

For the Banff/Canmore area, there were 884 job postings on the Job Bank in the fourth quarter of 2014, advertising for a total of 3,416 positions. The top five occupations were food counter attendants, kitchen helpers and related occupations (1,197 positions), food service supervisors (877 positions), light duty cleaners (357 positions), cooks (159 positions) and hotel front desk clerks (74 positions).



The EconomyThe Calgary region’s economy is affected by global economic activity, economic conditions in the U.S., and economic drivers in the Canadian economy and elsewhere in Alberta.

Global EconomyReal global economic growth averaged a moderate 3.2 per cent in 2014, and in 2015 this rate is expected to improve only marginally to 3.3 per cent.1 A confluence of factors served to limit confidence and activity in 2014, some of which have continued to dampen the economic outlook.

“The Ebola virus, heightened geopolitical tensions and the rotation of disappointing data that started in Canada and the US because of a bitter winter early in the year and migrated to the Euro area and Japan weighed on confidence that the global economy will be able to transition to a stronger growth path.”2

The most prominent development in the global economy since mid-2014 has been a slide of more than 50 per cent in the price of crude oil. The price drop was largely driven by higher oil production in countries such as the United States along with slower-than-anticipated energy demand growth in emerging markets. The resulting savings transferred to consumers and energy-dependent businesses is expected to be a net positive for the global economy, acting to reinforce stronger economic momentum internationally. Net oil-exporting economies will experience reduced growth due to potentially lower levels of production and capital spending, but may also enjoy positive spillover benefits from other channels as a result of the generally improved global demand outlook.

“Although beneficial at a global level, lower oil prices create both winners and losers. Many of the winners encompass larger economies or regions that can certainly use the added boost to household and business pocketbooks – like the euro zone, China and Japan. Although most advanced economies are net importers of oil, this is not the case for countries such as Canada and Norway.”3

The Asia/Pacific region will be among the greatest beneficiaries of reduced global energy prices as these economies as a group consume about 29 million barrels of oil per day and produce just 9 million barrels a day.4 A large majority of Asian nations import more than half of their oil needs, and countries such as Hong Kong, Singapore, Japan, and South Korea import virtually all of their demand.



1 Scotia Economics, Global Forecast Update, January 8, 2015.2 RBC Economics, Economic and Financial Market Outlook, December 2014.3 TD Economics, Global Outlook: Counting on America, December 17, 2014.4 Scotia Economics, Global Views, December 19, 2014.

External Oil Dependence in the Asia/Pacific Region

Source: Scotia Economics, Energy Information Administration

From the perspective of consumers, those in the U.S. and Canada are most likely to directly benefit from lower gasoline prices. First, Canadians and Americans tend to allocate a greater share of spending to gasoline. Further, in many European economies, a depreciated euro along with relatively higher fuel taxes has tempered the decline in prices.5 In emerging economies that provide fuel subsidies, some governments are expected to use lower oil prices as an opportunity to roll back subsidies, implying that consumers will not fully benefit from price declines.

U.S. and Canada Average Gasoline Prices, 2010 to 2015

Source: Scotia Economics, Bloomberg



5 Scotia Economics, Global Views, December 19, 2014.

Along with lower oil prices, a strong U.S. economy is expected to encourage global growth through 2015 and 2016. On the downside, economic prospects remain subdued in the euro area; China is struggling to limit its slowdown; Japan has entered a recession; and emerging markets face looming interest rate hikes in the U.S. that could result in episodes of currency volatility and capital flight.6

Global Economic Growth by Region, Year-over-Year, Actual and Forecast, 2014 to 2016

0"1"2"3"4"5"6"7"

World"

U.S."

Canada"

Japan"

Euro"Area"

Developing"Asia"

LaAn"Am

erica"

%"Growth"

2014" 2015" 2016"

Source: International Monetary Fund, World Economic Outlook Update, January 2015, p.1.

ADVANCED ECONOMIESIn terms of consistent real GDP growth, the U.K. has been among the top performing advanced economies, posting an average increase of 3.0 per cent over the past six quarters.7 Job growth was solid through 2014, but similar to many other advanced economies, wage growth has thus far been limited. Heading into 2015, lower oil prices and gradually rising wage pressures are expected to provide a boost to personal consumption, and construction activity should be supported by low interest rates and capital inflows.8 Acting as a counterbalance to these positive factors are a slowing housing market and a high degree of exposure to the lackluster euro area. Forecasters expect the U.K. economy to decelerate somewhat in 2015, but grow at a still healthy average rate of 2.4 per cent. The Financial Times annual economists’ survey reinforced the relatively optimistic U.K. outlook for 2015, with 77 of the 90 respondents expressing a belief that “decent expansion rates would endure another year,” though the longer-term outlook wasn’t as clear.9

Contrary to the U.K. experience, economic activity in Japan has been severely disappointing. After declining a sharp 6.7 per cent in the second quarter of 2014, real GDP growth failed to rebound in the third quarter and fell another 1.9 per cent, putting the Japanese economy into recession.10 The introduction of a consumption tax in the spring of 2014 undercut growth by a greater magnitude than



6 TD Economics, Global Outlook: Counting on America, December 17, 2014.7 Ibid.8 Scotia Economics, Global Forecast Update, January 8, 2015.9 Financial Times, Annual FT economists’ survey: UK growth forecast to continue, January 1, 2015.10 TD Economics, Global Outlook: Counting on America, December 17, 2014.

was anticipated, and the government’s plan to increase this tax again in October 2014 was deferred for another 18 months.

Along with the impact of the sales tax, consumer spending in Japan has been weighed down by negative real wage growth.11 Further, while lower energy prices offer some relief, the positive impact in Japan is relatively limited compared to that of most other advanced economies.

“…While 8% of the Japanese consumer’s spending goes towards energy, only 2.3% is spent at the pump and, as such, the Japanese consumer is netting only 0.2% of their monthly spending in fuel savings.” 12

Driven primarily by further depreciation of the yen and improvements in exports, recent data suggested that Japan was likely to post positive output growth in the fourth quarter of 2014.13 However, even if growth does turn positive in Japan, forecasters anticipate that it will remain modest over the next several quarters.

EURO AREAAs the region continued to struggle in the aftermath of the two financial crises it has endured over the past six years, euro zone output rose by a mild 0.6 per cent (annualized) in the third quarter of 2014.14 While this was a slight improvement over the second quarter’s dreary 0.2 per cent increase, the third quarter also revealed an alarming 0.2 per cent decline in investment spending. Investment in the euro area has shown only marginal improvement since the depths of the crisis, and in the fourth quarter of 2014 was 17 per cent lower relative to the first quarter of 2008.15 Weak levels of investment spending in 2014 reflected diminished confidence and credit availability in the region, a slow demand recovery and geopolitical tensions. As well as dragging down short-term output, sluggish investment can also impede the pace of a recovery and limit potential output.

“The dire need for investment seems to be generally recognized in Europe. Rising investment would help lift capacity constraints, help get people back to work, and hopefully strengthen R&D and other investments in innovation, which could help boost sluggish productivity growth.”16

Performance among the core euro area economies has been of particular concern. In Italy, economic growth has been negative for twelve of the past thirteen quarters.17 While France managed to post modest growth of 1.1 per cent in the third quarter of 2014, the primary drivers were inventories and public spending and did not suggest a strong foundation for a sustainable recovery. In Germany, a weak global backdrop dominated by downside risk has led to subdued business confidence and investment in recent quarters, with modest growth spurred by strong labour market conditions and consumer spending.

Economic prospects have improved in some of the peripheral euro area economies that were at the center of the euro crisis. Following the implementation of austerity measures that severely limited growth in 2012 and 2013, countries such as Spain, Ireland and Greece were among the region’s strongest performers late in 2014, particularly in employment gains.18 In aggregate, the implementation



11 Scotia Economics, Global Forecast Update, January 8, 2015.12 Scotia Economics, Global Views, December 19, 2014.13 TD Economics, Global Outlook: Counting on America, December 17, 2014.14 Ibid.15 Conference Board Economics Watch, European View, December 18, 2014.16 Ibid.17 TD Economics, Global Outlook: Counting on America, December 17, 2014.18 Ibid.

of the “three per cent budget deficit rule” for members appeared to have been successful, as the currency bloc’s deficit-to-GDP ratio declined to 2.4 per cent in 2014 from a high of 6.4 per cent in 2009.19 However, sustained growth in these peripheral economies is likely reliant on more robust activity in the aforementioned core economies.

For the euro area, the impact of lower oil prices is mixed. On the negative side, many economies in the region are already facing very low rates of price growth. As energy costs comprise more than one tenth of euro area consumer spending, the drop in the oil price makes it more likely that the European economy will slip into outright deflation.20 Persistently low (or negative) price growth may also force the European Central Bank (ECB) to undertake further quantitative easing (QE) measures.

However, the overall effect of lower oil prices is expected to be positive for the euro area. In early 2014, the high cost of energy was a primary concern of Europe’s private sector. Heading into 2015, lower prices could provide a much-needed boost to investment and employment in the region. Along with encouraging consumer spending, forecasters estimate that a long-term oil price of $60 could increase the earnings of high-use companies such as airlines by 40 per cent; and significantly reduce expenses for European mining companies and chemical producers for whom oil-related inputs account for two-thirds of raw material costs.21 Based on an analysis of oil supply shocks in 1986 and 1990, researchers found that for every 10 per cent fall in the oil price, earnings at quoted European companies increased 2.0 per cent. Further, if the ECB implements additional rounds of QE, the price of borrowing may decline and further stimulate investment spending; or the euro could depreciate and provide a boost to European exporters. The ECB is expected to expand its balance sheet by €1 trillion in 2015.22

While real output growth in the euro area underperformed at 0.7 per cent in 2014, forecasters are cautiously optimistic that the combination of lower energy prices, stronger stability in the banking sector, diminished fiscal austerity and continued policy stimulus on part of the ECB will push growth to 1.0 per cent in 2015 and 1.4 per cent in 2016.23 These growth rates suggest a gradual improvement in the economic outlook, but are still nowhere near those observed pre-2008.

CHINAEconomic growth continued to slow in China, coming in at 7.3 per cent in the third quarter of 2014 – the slowest pace since the global financial crisis.24 In an effort to provide a boost to its decelerating property sector and prevent an even greater slowdown in output, policymakers implemented stimulus measures throughout 2014 including interest rate cuts, a $125 billion liquidity injection into its banks, increased public sector investment spending, and an easing of mortgage regulations.

While China has maintained its position as a global growth leader with real GDP projected to increase by 7.4 per cent in 2014, economic activity is expected to moderate to a more sustainable rate of growth of slightly less than 7.0 per cent in 2015 and 2016.



19 Scotia Economics, Global Views, December 12, 2014.20 Financial Times, Oil price fall offers far more good than bad for Europe, December 17, 2014.21 Ibid.22 Scotia Economics, Global Views, December 12, 2014.23 RBC Economics, Economic and Financial Market Outlook, December 2014.24 TD Economics, Global Outlook: Counting on America, December 17, 2014.

“Even with continuing public sector investment, ongoing support from consumer spending, and the significant benefits accruing to lower-priced oil imports, the softening in real estate activity alongside the ongoing efforts to rein in lending highlight the risk of even slower growth and reduced demand for commodities.”25

On the upside, China should be a major beneficiary of lower oil prices. China is an oil-intensive economy, and in 2013 imported 56 per cent of its oil needs. Forecasters estimated that a sustained decline in the price of oil to $50 would raise China’s annual output by 0.5 to 0.75 percentage points over the next two years due to the resulting gains to consumer spending, investment, and the balance of trade.26 However, even a sustained oil-induced boost is unlikely to reverse the trend of China’s generally slowing growth trajectory. Further, the prevailing climate of lower global commodity prices may exacerbate the concern of disinflation both in China and abroad.

As of the fourth quarter of 2014, producer prices in China had been in outright decline for nearly three years and consumer price growth had dropped to a near five-year low.27 Much of this deflationary pressure was the result of industrial overcapacity, induced by excessive spending and development since the 2009 stimulus was launched to buffer China from the effects of the global financial crisis. Government researchers estimated that $6.8 trillion had been spent on “ineffective investment” such as needless factories, ghost cities and empty stadiums since 2009. Given that China is the world’s top exporter and the primary trading partner of dozens of countries, there is a threat of lower prices being exported and feeding through to weaker inflation globally – particularly in Japan and many European economies where weak demand and persistently low inflation are already significant policy concerns.

Deflation is considered undesirable as it increases the burden of debt in real terms, and can also restrain spending as consumers delay purchases in expectation of even cheaper prices.28

China's Producer and Consumer Price IndicesYear-over-Year Percentage Change, 2004 to 2014

Source: TD Economics, China National Bureau of Statistics



25 Scotia Economics, Global Forecast Update, January 8, 2015.26 Scotia Economics, Global Views, December 19, 2014.27 Financial Times, China: Fear of a deflationary spiral, November 30, 2014.28 Ibid.

RUSSIAThe Russian economy faced severe turmoil during the latter half of 2014, triggered by falling oil prices, intensifying capital flight and Western sanctions. In November 2014, Russia’s GDP was down 0.5 per cent – the first decline in five years.29

A confluence of factors contributed to a collapse of the rouble in the fourth quarter of 2014. Along with many other emerging market currencies, strong economic data and the possibility of interest rate hikes in the U.S. induced depreciation relative to the U.S. dollar.30 However, the rouble suffered more than other currencies due to sanctions resulting from Russia’s involvement in the Ukrainian crisis, which prevent some of Russia’s largest firms from accessing long-term debt financing in Western capital markets. Further, the sharp decline in oil prices pushed the rouble even lower, reflecting the strong relationship between Russian state revenues and oil exports. Russia is the world’s largest oil and gas producer, with the industry providing 68 per cent of its exports and 50 per cent of its federal budget.31 These issues led to the rouble losing 45 per cent of its value in 2014, and also triggered concerns regarding the ability of Russian firms to fulfill their foreign debt obligations and the spillover effects this may cause on the global economy – particularly in the euro area. Russia’s external debt was $679.4 billion as of the third quarter of 2014, and euro area banks claimed about 20 per cent of this total.32

During the fourth quarter of 2014, other issues exacerbating Russia’s economic downturn included an 11.4 per cent rate of inflation in November – far above the Central Bank of Russia’s (CBR) 4.0 per cent target.33 As well, banking sector stability was a concern as the government was forced to rescue National Bank Trust, one of Russia’s largest banks. In an attempt to combat high inflation, capital flight and the weakened rouble, the CBR drastically increased its key interest rate from 10.5 to 17.0 per cent in December, a surprising move that was generally criticized as ineffective.34

Brent Crude Oil Price and Russian Rouble per USDJuly 2014 to January 2015

Source: TD Economics, Bloomberg



29 Financial Times, Russian GDP falls for first time in five years, December 29, 2014.30 TD Economics, Observation: Assessing the Risks from Russia, Greece and the European Central Bank, January 9, 2015.31 Financial Post, Oil at $40 possible as market meltdown rivals worst seen during the financial crisis, December 1, 2014.32 TD Economics, Observation: Assessing the Risks from Russia, Greece and the European Central Bank, January 9, 2015.33 Ibid.34 The Telegraph, Russia set to slash interest rates just a month after hike ‘mistake’, January 21, 2015.

Russia will likely face a deeper economic downturn through 2015. The CBR acknowledged that the economy could contract by 4.5 to 4.7 per cent in 2015, based on an average oil price of $60.35 Forecasters expect the Russian economy to decline by an even greater magnitude in 2015, and remain a key source of risk to the global economic outlook.

“Recessionary forces are gathering steam, inflation is worryingly high, and banking sector stability is concerning. We now expect that the Russian economy will contract by 5% in 2015 as tight liquidity and elevated interest rates dampen domestic demand, and lower energy prices reduce its main export revenue. In 2016, the expected improvement in oil prices and an expected easing of sanctions should support a modest economic rebound.”36

FORECAST RISKSDuring the final quarter of 2014, the most notable factor affecting global economic growth projections was a plunge in the price of oil. From its June 2014 high of about $107 per barrel, the benchmark price of West Texas Intermediate (WTI) tumbled by more than 57 per cent to a six-year low of less than $46 in January 2015.37 Similar declines were observed in Europe’s Brent Crude and Canada’s Western Canadian Select (WCS) benchmarks. The rapid WTI price decline came as a surprise to most analysts and led to frequent and substantial economic forecast revisions toward the end of 2014 and into 2015. In mid-January 2015, Goldman Sachs predicted the price of WTI at $39 by mid-2015 and $65 by year-end, compared to prior forecasts of $75 and $80 respectively.38 As recently as mid-2014, some forecasters had predicted that geopolitical tensions in the Middle East would lead to supply disruptions and a long-term oil price of $200.39 Due to the wide array of considerations involved, a great deal of uncertainty remains as to the price at which oil will settle in the long run.

“The decline in oil prices reflects a confluence of factors, including several years of upward surprises in oil supply and downward surprises in demand, receding geopolitical risks in some areas of the world, a significant change in policy objectives of the Organization of the Petroleum Exporting Countries (OPEC), and appreciation of the U.S. dollar. Although the relative strength of the forces driving the recent plunge in prices remains uncertain, supply related factors appear to have played a dominant role.”40

Indeed, a major impetus of oil’s price plunge was OPEC, which controls nearly 40 per cent of the global market,41 refusing in November 2014 to curb its production by the estimated 1 million barrels per day it would take to stabilize prices.42 While OPEC’s official charter states a goal of “stabilisation of prices in international oil markets”, Saudi Arabia (which accounts for about one-third of OPEC production, or 10 million barrels per day) has pursued a strategy of preserving market share by allowing the price to fall, potentially putting high-cost producers out of business.43 Many of these marginal producers are in the U.S. shale industry, where tremendous growth over the past four years has increased American oil production by more than 30 per cent. Saudi Arabia can tolerate lower oil prices, as it holds an estimated $900 billion in reserves and enjoys operating costs as low as $5 to $6



35 TD Economics, Observation: Assessing the Risks from Russia, Greece and the European Central Bank, January 9, 2015.36 Scotia Economics, Global Forecast Update, January 8, 2015.37 MarketWatch, Oil plunges below $46 as Goldman cuts outlook, January 12, 2015.38 Ibid.39 MarketWatch, If Iraqi oil goes off line, $200 oil is next, June 17, 2014.40 World Bank, Most Developing Countries Will Benefit from Oil Price Slump, Says World Bank Group, January 7, 2015.41 The Economist, Why the oil price is falling, December 8, 2014.42 Financial Times, Two cheers for the sharp falls in oil prices, December 2, 2014.43 The Economist, Sheikhs v shale, December 6, 2014.

per barrel.44 Saudi Arabia’s decision to maintain production, regardless of price, supports the view that oil prices will remain soft for at least a year.

However, not all OPEC members will benefit from the move to let the price of oil continue to drop. While the smaller Gulf members of Kuwait, Qatar and the United Arab Emirates can tolerate low prices due to very low breakeven prices, higher-cost members such as Iran, Venezuela, Iraq, Libya and Nigeria have already encountered budget challenges, infrastructure limitations, and bouts of civil unrest related to the recent price drop.45 Venezuela has been particularly affected, as oil accounts for 96 per cent of its export revenues.

“...The fact that the some members still have spare productive capacity while others are facing structural declines ahead following years of underinvestment and lack of capital may have further widened the gap in perspective between the various interest groups.”46

Many non-OPEC producers have also encountered financial difficulties in the aftermath of oil’s drop. Petronas, Malaysia’s state-owned oil and gas company from which nearly one-third of state revenues are derived, announced that it will cut capital expenditure by at least 15 to 20 per cent.47 As liquefied natural gas (LNG) prices tend to follow oil after a few months lag, Petronas is uncertain as to whether it will proceed with its planned large-scale LNG project in British Columbia. Globally, it is anticipated that a significant portion of the estimated $2 trillion in planned development spending on future oil and gas projects could be delayed or cancelled.48

While oil-exporting nations will suffer the consequences of lower prices and reduced oil-related investment, cheaper oil is expected to benefit both oil-importing nations as well as the global economy as a whole.49 A $40 decline in the price of oil represents a shift of about $1.3 trillion globally from producers to consumers.50 As consumers are much more likely to spend these funds relative to producers, global GDP should be stimulated through higher levels of consumer expenditure.

Most oil-price economic analyses have focused on supply-driven upward price shocks. For example, the International Monetary Fund (IMF) found that a 20 per cent increase in oil prices would subtract about 0.5 percentage points from global growth.51 However, the recent drop in prices was partially attributable to diminished global demand, suggesting that oil’s decline is unlikely to induce as large an opposite positive response.

The shale industry, which has driven much of the oil production boom in the U.S, may be among the hardest hit by low oil prices. Firms in this industry tend to be heavily leveraged and rely on relatively higher breakeven oil prices. However, an upside risk is that the industry is still quite young and continues to achieve efficiency gains through innovation. Through 2014, it was estimated that the average breakeven price of a typical new shale project fell from $70 per barrel to $57.52 The drop in oil prices may encourage further innovation in the industry, with a number of the world’s richest shale reserves in Russia, China, Australia, Mexico and Argentina yet unexploited.53



44 The Economist, Why the oil price is falling, December 8, 2014.45 Business Insider, The OPEC Era Is Over, December 9, 2014.46 Ibid.47 Financial Times, Falling oil price shatters Asia’s assumptions, December 3, 2014.48 MarketWatch, Oil’s slump could upend $2 trillion in investments: Goldman, January 12, 2015.49 World Bank, Most Developing Countries Will Benefit from Oil Price Slump, Says World Bank Group, January 7, 2015.50 The Economist, Sheikhs v shale, December 6, 2014.51 TD Economics, Global Outlook: Counting on America, December 17, 2014.52 The Economist, Sheikhs v shale, December 6, 2014.53 Business Insider, Low Oil Prices are Putting the Freeze on Fracking Projects Around the World, December 8, 2014.

A number of factors may also provide some upside risk to the long-term price of oil. Following a price collapse to $10 per barrel in the late 1990s, lower gasoline prices encouraged higher demand for gas-guzzling autos.54 At the same time, oil production declined as companies cut exploration and development budgets. By early 2005, the price of oil had rebounded to more than $50, eventually rising to $120 in 2008 prior to the global recession.

“History is already repeating itself. Sales of SUVs and pickup trucks in the United States rose sharply in the final months of 2014, and high-cost oil producers have already made steep cuts in their capital expenditures. … These cutbacks will eventually reduce the supply of oil on world markets and put upward pressure on prices.”55



54 Conference Board of Canada, Why “Bottom of the Barrel” Oil Prices Won’t Last, January 7, 2015.55 Ibid.

U.S. EconomyThe U.S. economy grew much faster than was anticipated during the third quarter of 2014. Following two significant upward revisions, annualized third quarter real GDP growth was estimated at 5.0 per cent – the largest quarterly increase since the third quarter of 2003.56 While some of this upturn was a continuation of a rebound from the first quarter’s 2.1 per cent weather-related decline, it followed an already-outsized 4.6 per cent real output increase in the second quarter of the year.

Much of the third quarter’s strong overall performance was driven by growth in consumer spending, which exceeded expectations at 3.2 per cent.57 Growth in nonresidential investment spending (+4.8 per cent) also contributed to the third quarter’s robust performance.

With 2014 coming to a close, however, consumer spending appeared to slow somewhat relative to prior quarters. Retail sales fell 0.9 per cent on the month in December, underperforming market expectations and representing the largest monthly decline in nearly a year.58 Much of this weakness was attributable to the price of gasoline falling 12.7 per cent in December, as gasoline stations represent about 10 per cent of all retail spending.59 If sustained, lower gasoline prices are expected to save the average U.S. household $500 annually.60 However, consumers have so far been reluctant to spend the money they saved at the pump, as core sales (which excludes gasoline, autos and building materials) also declined by 0.4 per cent on the month, significantly below the consensus forecast of a 0.5 per cent increase. Nonetheless, retail sales were up by 4.0 per cent year-over-year in 2014, down only slightly from 4.1 per cent in 2013. Forecasters are optimistic that December’s poor sales were a temporary setback brought on by outsized gains in prior months, labour disputes at west coast ports, and aggressive seasonal price discounting.61

“With most economic indicators remaining at high levels and with continued progress in the labor market, alongside the lower gasoline prices, we expect consumer spending to remain robust over the coming months and in 2015 generally.” 62

Auto sales in the U.S. were strong throughout 2014, coming in at total of 16.4 million units to mark an eight-year high.63 Perhaps encouraged by lower gasoline prices in the latter half of the year, growth in light truck sales in 2014 (+10 per cent) substantially outpaced that of passenger cars (+1 per cent). Given the economic climate of improving consumer sentiment, still-strong replacement demand, low interest rates and projected employment growth, forecasters expect auto sales to reach the 17-million unit mark in 2015 – the highest level since 2001.

Plunging energy prices prompted a narrowing of the U.S. trade deficit to $39.0 billion in November – the second consecutive monthly improvement and representing the smallest monthly deficit since December 2013.64 However, the improved trade balance was brought about by diminished exports (-1.0 per cent) being outweighed by an even greater decline in imports (-2.2 per cent). Further, with petroleum excluded from the measure, the U.S. trade deficit actually widened in November.



56 BMO Economics, EconoFACTS: For the U.S., Santa Came Early This Year, December 23, 2014.57 RBC Economics, U.S. National GDP Accounts, December 23, 2014.58 BMO Economics, EconoFACTS: U.S. Retail Sales Frozen.. The Cold (Or Lack Thereof) Really Bothered Them Anyway, January 14, 2015.59 TD Economics, Data Release: Retailers end the year on a soft note, January 14, 2015.60 TD Economics, U.S. Outlook: The Tide Is Turning, December 17, 2014.61 Scotia Economics, Flash: US Consumer Steps Back In December, Q4 Still Looks OK, January 14, 2015.62 TD Economics, Data Release: Retailers end the year on a soft note, January 14, 2015.63 TD Economics, Data Release: U.S. auto sales finish the year strong, January 5, 2015.64 BMO Economics, EconoFACTS: Lower Petro Prices = Lower U.S. Goods & Services Trade Deficit, January 7, 2015.

“The primary reason for the improvement in the trade balance was a substantial decline in the trade deficit for petroleum products, which fell by $3.8bn. Prices for both petroleum exports and imports fell, and with America remaining a net importer, the price decline led to a lower deficit.”65

Despite a relative strengthening of the U.S. dollar dampening the export outlook, the U.S. trade deficit could narrow further as oil prices continued to fall through December. While November’s decline in imports suggested downside risk for U.S. business investment, net exports are likely to provide a modest 0.2 point addition to annualized fourth quarter GDP growth in 2014.66

Forecasters are generally optimistic that the above-potential U.S. growth observed during the third quarter of 2014 continued into the next, with annualized fourth quarter real GDP growth estimates in the range of 3.0 per cent.67 Following a volatile 2014 with average annual growth expected to come in at around 2.5 per cent; the U.S. economy is projected to sustain real growth of slightly less than 3.0 per cent into 2015 and 2016.

U.S. Economic Outlook (% change, period-over-period annualized)

Q1* Q2* Q3* Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2016Real GDP -2.1 4.6 5.0 3.2 2.4 2.8 3.1 3.0 2.6 2.7 2.5 2.4 2.5 3.2 2.7Consumer Expenditure 1.2 2.5 3.2 3.9 3.3 3.5 3.3 3.0 2.5 2.6 2.4 2.3 2.5 3.4 2.8Business Investment 1.6 9.7 8.9 3.6 3.7 4.3 5.9 6.8 6.1 4.9 3.8 3.5 6.2 5.3 5.4Govt. Consumption & Investment -0.8 1.7 4.4 -1.1 1.2 1.2 1.0 0.9 0.6 0.7 0.9 0.7 -0.1 1.1 0.8Exports -9.2 11.0 4.6 4.8 2.1 3.4 4.3 4.5 4.9 5.2 5.7 5.5 3.2 4.1 4.8Imports 2.2 11.3 -0.9 5.0 6.3 7.0 7.7 7.2 6.5 5.9 5.4 4.6 3.6 5.8 6.4Federal Funds Target Rate (%) 0.25 0.25 0.25 0.25 0.25 0.25 0.50 0.75 1.00 1.00 1.00 1.25 0.25 0.44 1.06Consumer Price Index (Y/Y) 1.4 2.1 1.8 1.2 -0.1 -0.4 0.2 1.2 2.7 2.8 2.5 2.4 1.6 0.2 2.6Housing Starts (mns: a.r.) 0.93 0.99 1.03 1.08 1.12 1.20 1.29 1.38 1.44 1.50 1.55 1.60 1.00 1.25 1.52Exchange Rate: CAD per USD 1.11 1.07 1.12 1.16 1.24 1.25 1.27 1.30 1.33 1.27 1.22 1.18 1.12 1.27 1.25Employment 1.5 2.2 2.1 2.4 2.1 2.0 1.9 1.7 1.6 1.5 1.4 1.3 1.9 2.1 1.7Unemployment Rate (%) 6.6 6.2 6.1 5.7 5.5 5.4 5.3 5.2 5.2 5.1 5.1 5.1 6.2 5.4 5.1Labour Force 2.1 -0.5 1.0 0.7 0.9 1.0 1.0 1.0 1.0 0.9 0.9 0.9 0.3 0.9 1.0Personal Savings Rate (%) 4.9 5.1 4.7 4.8 5.4 5.3 5.1 5.0 5.0 4.9 4.8 4.7 4.9 5.2 4.9

*Actual data or most recent estimates.

2016Category

2014 2015 Annual Average

Source: TD Economics, Quarterly Economic Forecast - US Outlook, December 17, 2014.

LABOUR MARKETA larger-than-anticipated employment increase of 252,000 jobs in December 2014 capped a strong year for the U.S. labour market. 68 Nearly three million new jobs were added in 2014 – the best annual performance since the tech boom of 1999.69 Upward revisions to prior months brought 2014’s fourth quarter average monthly job gain to 289,000 and suggested good momentum heading into 2015.

December’s job growth was broad-based as the public and private sectors added 12,000 and 240,000 new positions respectively. Monthly employment growth in the goods sector amounted to 67,000, led by construction (+48,000) and manufacturing (+17,000).70 Manufacturing added an average of about 16,000 jobs per month in 2014, up from 2013’s monthly average of 7,000. Professional and business services (+52,000) drove much of the service sector’s gain of 173,000 jobs in December, along with



65 TD Economics, Data Release: Lower energy prices lead to smallest trade deficit of 2014, January 7, 2015.66 RBC Economics, US November trade deficit shrinks, January 7, 2015.67 Ibid.68 Nonfarm payroll employment.69 BMO Economics, EconoFACTS: U.S. Jobs: In Like a Lamb, Out Like a Lion, January 9, 2015.70 Bureau of Labor Statistics, The Employment Situation – December 2014, January 9, 2015.

solid expansions from food services (+44,000) and health care and social assistance (+44,000). Even the oil and gas extraction industry managed to increase its payrolls slightly (+400) despite the climate of plunging oil prices.

Along with steady job growth through the fourth quarter of 2014, the headline national unemployment rate fell by 0.2 points on the month to 5.6 per cent in December 2014– down substantially from 6.7 per cent at the end of 2013 and representing the lowest rate since June 2008.71 Improvement was also observed in the “all-in” unemployment rate (accounting for discouraged, marginally attached, and involuntary part-time workers), which in December declined to 11.2 per cent from 13.1 per cent at the end of 2013.

While broad labour market improvement was evident during the fourth quarter of 2014, the steep decline in the jobless rate was as much a result of declining labour force participation as it was employment growth. December’s household survey suggested that the labour force had shrunk by 273,000 on the month, representing a participation rate of 62.7 per cent.72 While the participation rate edged down just 0.1 points throughout 2014, this decline followed a 0.9 point drop in 2013 and some forecasters anticipate a continuation of the downward trend into 2015 and beyond, driven primarily by an aging workforce.73

Despite strengthening labour market conditions in 2014, significant real wage growth has not yet materialized. Average hourly earnings declined by 0.2 per cent in December – the most precipitous monthly drop since the depths of the Great Recession when the jobless rate neared 10 per cent.74 On a year-over-year basis, average hourly wage growth in 2014 trended only slightly higher than December’s very low 0.8 per cent increase in the Consumer Price Index (CPI) for all urban consumers.75

Year-over-Year Change in Average Hourly Earnings and Average Weekly Earnings, U.S, January 2010 to December 2014

Source: Bureau of Labor Statistics - Data

1.0%%

1.5%%

2.0%%

2.5%%

3.0%%

3.5%%

Jan,10%

Apr,10%

Jul,1

0%Oct,10%

Jan,11%

Apr,11%

Jul,1

1%Oct,11%

Jan,12%

Apr,12%

Jul,1

2%Oct,12%

Jan,13%

Apr,13%

Jul,1

3%Oct,13%

Jan,14%

Apr,14%

Jul,1

4%Oct,14%

Avg%Hourly%Earnings% Avg%Weekly%Earnings%



71 Scotia Economics, US Labor Market Posts Bumper 2014, January 9, 2015.72 TD Economics, Data Release: Job growth continues its strong run through December with 252k jobs created, January 9, 2015.73 BMO Economics, EconoFACTS: U.S. Jobs: In Like a Lamb, Out Like a Lion, January 9, 2015.74 Ibid.75 Bureau of Labor Statistics, Consumer Price Index Summary – December 2014, January 16, 2015.

Wage growth in the U.S. labour market holds important implications for the Canadian economy, as the lack of any meaningful wage increase has been a motivating factor in the Federal Reserve choosing to postpone raising the federal funds rate from its current near-zero range. Once the federal funds rate begins to increase, which most forecasters expect to occur sometime around mid-2015, it is likely to exert further depreciative pressure on the Canadian dollar – particularly in light of the Bank of Canada’s surprise cut to its key overnight rate in January 2015.

A number of factors should encourage wage growth in the U.S. labour market through 2015, notably the prevailing climate of low energy prices acting to stimulate consumer spending and hiring across most sectors.76 Further, the state minimum wage was increased in 21 states in early 2015. While only about 1.5 per cent of workers in the U.S. are directly exposed to state minimum wages, an increase tends to indirectly raise the wages of those in slightly higher income brackets as employers adjust across the pay scale.77

Despite stagnant wage growth, average weekly hours worked edged up by 0.2 per cent in December 2014, and by a very strong 3.5 per cent annualized rate during the fourth quarter. The upward trend in hours worked is expected to provide a boost to near-term GDP growth and lead to further tightening of the U.S. labour market.

“The last year was a truly breakout year for the labor market. The strongest job growth in 15 years came alongside rapidly declining job vacancies and increasing labor market turnover -- both signs of a healthy labor market. Businesses are increasingly looking to hire and workers are increasingly confident in their prospects of finding a job. All this suggests that the momentum should continue into the next year, providing support to domestic spending even amidst a gloomy global backdrop.”78

FINANCIAL AND CURRENCY MARKETSAt the December 2014 meeting of the Federal Open Market Committee (FOMC), participant views on U.S. economic conditions were mostly optimistic, with greater concern expressed regarding the weakened international outlook and the downside risks it may pose.79 Participants generally agreed that domestic momentum was strengthening in terms of spending, consumer and business confidence, and employment. It was also agreed that the net effect of lower oil prices would be positive for the domestic economy.

However, the FOMC was less confident in its assessment of wage growth and existing labour market slack. Most participants “saw no clear evidence” of a pickup in wages, and debate continued as to the accuracy of the falling unemployment rate in reflecting the reality of labour market tightness.80 These factors, along with persistently low rates of inflation, have made the FOMC hesitant to raise its benchmark interest rate even in the prevailing climate of improved economic conditions.

The FOMC noted in December that it would be “patient” and “flexible” in beginning to normalize monetary policy through rate hikes, but viewed the recent decline in inflation as the temporary result of an appreciated U.S. dollar and lower energy prices, and would not forestall policy action.81 Further,



76 RBC Economics, US employment continues to rise in December, January 9, 2015.77 Scotia Economics, Global Views, January 16, 2015.78 TD Economics, Data Release: Job growth continues its strong run through December with 252k jobs created, January 9, 2015.79 RBC Economics, US Highlights of the minutes from the December 16 and 17 FOMC meeting, January 7, 2015.80 Ibid.81 TD Economics, Data Release: A “patient” Fed looking for flexibility in responding to economic developments, January 7, 2015.

Federal Reserve Chair Janet Yellen claimed that the strengthening U.S. labour market would eventually beget higher wages and thus inflationary pressure.82

“The challenge for the Federal Reserve is that it does not set policy for the inflation rate today, but for where it expects it to be in the future. It must therefore look through the temporary weakness in inflation to indicators of future price growth. The increase in labor market turnover and the rise in job openings are a sign that wage growth will continue to move higher.”83

Actual and Forecasted Year-over-Year Change in U.S. Consumer Price Index and Core CPI, Q1 2007 to Q4 2016

Source: Bureau of Labor Statistics - Data

The FOMC’s forward guidance suggested that following the withdrawal of the quantitative easing program in October 2014, further monetary tightening was unlikely to occur until at least April 2015. Forecasters generally expect increases to the federal funds rate to begin in mid-2015, rising from its current near-zero range to 1.00 per cent by the end of the year.84 While rate normalization is implemented in an effort to maintain financial market stability, it remains an important source of downside risk to the U.S. economy.

“As policy normalization draws closer, however, we must recognize that this in itself is a source of risk to the economic outlook. Given the amount of leverage still in the global financial system and the search for yield that has come out of the prolonged period of extra-low rates, there is a chance that policy removal will not go totally smoothly. We know from the 2013 taper tantrum experience that markets may not treat the gradual withdrawal of stimulus as gradual. A sudden disruption to credit markets is the most obvious downside risk to the economic outlook.”85

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82 Scotia Economics, US Labor Market Posts Bumper 2014, January 9, 2015.83 TD Economics, U.S. Outlook: The Tide Is Turning, December 17, 2014.84 RBC Economics, US November trade deficit shrinks, January 7, 2015.85 TD Economics, U.S. Outlook: The Tide Is Turning, December 17, 2014.

HOUSING MARKETIn November 2014, existing home sales in the U.S. fell a substantial 6.1 per cent on the month to 4.93 million units annualized, representing the largest monthly decline since July 2010 and the lowest sales level since May 2014.86 Fewer sales were observed for both single-family (-6.3 per cent) and multi-unit (-4.8 per cent) homes; and overall sales were down across all regions. While some of the slowdown in home sales was attributed to colder-than-usual weather, a lack of available inventory has also been cited as a concern.

“Indeed, inventories of homes with a “FOR SALE” sign in the front lawn dropped for the 4th consecutive month, down 6.7% in November to an 8-month low. But coupled with the sales setback, the months’ supply held at 5.1.”87

A factor that may be discouraging potential sellers is a slowing in the rate of home price growth. The S&P/Case-Shiller 20-City Composite Home Price Index registered a monthly increase of 0.8 per cent in October 2014, outpacing forecaster expectations and representing the second consecutive gain.88 However, these increases followed four consecutive months of decline during the summer, and in October the index was up 4.5 per cent year-over-year – the slowest rate of increase in two years.

Perhaps encouraged by slower price growth, a positive development in November 2014 was that the share of first-time homebuyers increased to 31 per cent, its largest share since October 2012 (but still significantly below the normal 40-50 per cent range).89 Forecasters anticipate that the share of first-time homebuyers will continue to edge up due to steady job growth along with efforts to relax mortgage lending rules, including a reduction in the down payment requirement.

Despite slowing home price growth, the number of housing starts is expected to increase substantially over the next couple of years, possessing beneficial spillover effects for Canada’s softwood lumber exporters. Annual housing starts in the U.S. are forecast to increase from just over 1.0 million units in 2014 to 1.6 million by the fourth quarter of 2016.90 Lower mortgage rates and a loosening of the regulations applied to first-time homebuyers are projected to drive much of the increase.

SHALE OILThe substantial decline in oil prices, which reflected a confluence of both supply and demand factors, is expected to have a net positive impact on the U.S. economy. However, lower oil prices may threaten the growth and sustainability of America’s shale industry. U.S. shale has exhibited tremendous production growth in recent years, with oil output rising from 0.5 per cent of the global total in 2008 to 3.7 per cent in 201491 – the equivalent of adding the annual production of Libya each year. Further, shale accounted for more than 20 per cent of global investment in oil production in 2014. As most major oil companies used a long-term oil price of $80 in making investment plans, and the shale industry has been deemed “unhealthy” at prices below $70, it is likely that an increasing number of oil projects will be cancelled or deferred. Even in the Bakken formation (which includes parts of Montana, North Dakota, Saskatchewan and Manitoba) where existing infrastructure reduces costs, applications for drilling permits were down 40 per cent in November 2014.



86 BMO Economics, EconoFACTS: U.S. Existing Home Sales – Lump of Coal, December 22, 2014.87 Ibid.88 RBC Economics, US consumer confidence increased in December, December 30, 2014.89 BMO Economics, EconoFACTS: U.S. Existing Home Sales – Lump of Coal, December 22, 2014.90 TD Economics, U.S. Outlook: The Tide Is Turning, December 17, 2014.91 The Economist, In a bind, December 6, 2014.

“Oil-price slumps usually lead to cuts in energy firms’ investments. Production eventually falls, helping prices to stabilise. In 1999, after the Asian crisis, global investment in oil and gas production dropped by 20%. A decade later, after the financial crisis, investment fell by 10%, then recovered.”92

As the operating costs of existing shale wells are relatively low (in the range of $10 to $20 per barrel of oil), it is unlikely that current production will decline in the short-term.93 However, the output of shale wells declines rapidly beyond the first year of production by 60 to 70 per cent, suggesting that growth in longer-term production levels may be impacted with a lack of new wells coming on stream.

Actual and Forecasted U.S. Crude Oil Production, WTI PriceJanuary 2008 to December 2016

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 13, 2015.

The weak balance sheets of many firms involved in shale oil will also pose a downside risk to the sustainability of the industry as well as to financial markets. Debt accumulation among U.S. exploration and production firms has doubled since 2009 to $260 billion, and more than one quarter of shale firms hold debt of more than three times their gross operating profits.94

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92 The Economist, In a bind, December 6, 2014.93 TD Economics, U.S. Outlook: The Tide Is Turning, December 17, 2014.94 The Economist, In a bind, December 6, 2014.

Leverage of U.S. Independent Energy Companies2004 to 2013

Source: The Economist, Bloomberg

While forecasters are generally confident that the fall in oil prices will yield supply and demand responses that bring the price back up in the long-term, the anticipated rebound will almost certainly be slower than was the decline. In the meantime, it is likely that marginal shale producers will be squeezed out, with slower investment and employment growth in regions where shale comprises a significant share of industry.95

On the positive side, the shale industry claims to already be underway with cost-saving and production-enhancing innovations. Further, if and when oil prices recover, new wells can be brought on stream in weeks rather than years.

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95 TD Economics, U.S. Outlook: The Tide Is Turning, December 17, 2014.

Canadian EconomyWhile oil prices began to slide early in the third quarter of 2014, the projected negative impact on the Canadian economy was not immediately observed. Following robust annualized GDP growth of 3.6 per cent in the second quarter, momentum was encouraged through the third quarter by a healthy U.S. economic outlook, a depreciating Canadian dollar, lower gasoline prices and accommodative lending conditions. Annualized third quarter real output grew at a solid 2.8 per cent with strong contributions from exports, investment in machinery and equipment, consumption spending and residential construction.96

Heading into the fourth quarter of 2014, monthly real GDP gains continued to surpass expectations despite a climate of persistently lower oil prices. Stronger than anticipated growth in the manufacturing, construction and service sectors provided a boost, and even the mining, oil and gas sector appeared resilient, posting solid monthly gains of 2.0 and 1.2 per cent in September and October respectively.97 Preliminary estimates positioned annualized fourth quarter real GDP growth at a still solid pace of 2.3 per cent.

Similarly, while job growth was volatile through 2014, the average monthly gain of about 15,000 new positions was nearly twice that of 8,000 in 2013.98 The creation of 135,000 full-time jobs during the second half of the year was also encouraging.99 Further, the national unemployment rate averaged 6.6 per cent in the fourth quarter of 2014, down from 6.9 per cent in the third quarter – and the improvement was only partially driven by a declining labour force participation rate. The strengthening in hiring activity during the second half of 2014 corresponded to the economy running at an above-potential pace, supporting growth across most of Canada’s major sectors.

“Consumer spending remains reasonably buoyant. Vehicle sales remain one of the strongest retail sectors, and have continued to set record highs in 2014. Housing activity remains robust, with low mortgage rates maintaining affordability despite record-high prices. … Manufacturing and exports remain strong with producers benefitting from strengthening auto sales and residential construction in the US, and a more competitive currency. The pickup in exports has been broad-based, with solid increases in both energy and non-energy goods.”100



96 TD Economics, Canadian Outlook: Falling Price of Oil is the Name of the Game, December 17, 2014.97 BMO Economics, EconoFACTS: Energy Powers Canadian Growth … For Now, December 23, 2014.98 Scotia Economics, Canadian Job Details Are Stronger Than The Headline Loss, January 9, 2015.99 Scotia Economics, Global Views, January 16, 2015.100 Scotia Economics, Foreign Exchange Outlook, January 8, 2015.

CANADIAN ECONOMY AT A GLANCE




Real GDP (% change)

Q3 2014

Q2 2014

Q3 2013Real GDP

(% change)2.8 3.6 3.0

CAD/USD

Q4 2014

Q3 2014

Q4 2013

CAD/USD0.88 0.92 0.95

CPI Inflation (% change)

Nov 2014

Oct 2014

Nov 2013CPI Inflation

(% change)2.0 2.4 0.9

Overnight Rate (%)

Q4 2014

Q3 2014

Q4 2013Overnight

Rate (%)1.0 1.0 1.0

Population (millions of persons)

Q3 2014

Q2 2014

Q3 2013Population

(millions of persons) 35.7 35.5 35.3

However, as oil prices continued their downward trajectory during the fourth quarter of 2014 with no sign of a rebound, forecasters reassessed their oil price projections and the resulting implications to near-term economic growth in Canada. While lower oil prices appear to have had a net neutral effect on GDP growth in 2014, the impact heading into 2015 will be unambiguously negative.

Lower oil prices are expected to stifle Canada’s economic growth through a variety of channels in 2015. Prices have generally fallen below the breakeven threshold at which new oil projects are deemed to be profitable, implying that new investment (and correlated employment gains) in the oil sands will suffer until prices recover. As well, energy-related taxes and royalties comprise a significant portion of government revenues, particularly in Alberta. With reduced oil-related activity and royalty payments, government budgets will likely be strained over the near-term horizon. Canada’s trade deficit is also expected to widen into 2015 as energy exporters receive cheaper prices globally. In December 2014, Bank of Canada Governor Stephen Poloz announced that lower oil prices would subtract an estimated 0.3 percentage points from GDP growth in 2015.101

There will be some positive spillovers heading into 2015, including a stronger outlook for the U.S. economy (which benefits from lower oil prices), a depreciated Canadian dollar providing a competitive boost to exporters, lower energy input prices for many producers, and cheaper gasoline prices for consumers. There may also be a regional shift in growth dynamics, with oil-rich provinces such as Alberta (which accounted for about one-third of Canada’s job gains in 2014) replaced by manufacturing-intensive Central Canada as the engine of economic activity.102

Forecasted Year-over-Year % Change in Real GDP, 2014 to 2016 by Date of Forecast and Average Forecasted Oil Price in 2015

Source: TD Economics, Economic Forecast Update, January 26, 2015.

Given its status as a leading producer and exporter of oil, Canada’s economic outlook has weakened with real GDP projected at about 2.0 per cent in 2015, improving slightly to 2.2 per cent in 2016 in line with a projected recovery in energy prices.

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101 Financial Post, Oil price slide will shave 1/3 of a point off 2015 GDP, says Bank of Canada’s Poloz, December 5, 2014.102 RBC Economics, Canadian employment slipped and unemployment rate steady in December, January 9, 2015.

“Lower oil prices will take a bite out of both output and incomes. While consumers will get some relief at the pumps, this benefit is more than offset by lower corporate profits and weaker income growth. Lower corporate profits will likely lead to a contraction in business investment and weaker employment growth. […] However, the story will play out very differently in various regions of the country, with oil-producing provinces bearing the brunt of the downward revisions.”103

Canadian Economic Outlook (% change, period-over-period annualized)

Q1* Q2* Q3* Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2016

Real GDP 1.0 3.6 2.8 2.3 1.0 1.7 2.4 2.2 2.4 2.3 2.1 1.9 2.5 1.8 2.2Consumer Expenditure 1.5 4.4 2.8 2.4 1.8 1.8 2.1 2.0 1.8 1.9 2.0 1.9 2.8 2.3 1.9Business Investment -1.9 0.8 0.5 0.8 -4.5 -2.3 -0.6 2.0 3.4 4.1 3.8 3.5 -0.5 -1.3 2.4Housing Starts ('000s) 175 197 195 189 184 182 174 169 174 178 178 176 189 177 177Exports 0.9 19.0 6.9 -3.6 6.5 7.0 7.9 7.5 6.7 5.0 4.0 3.4 5.1 5.6 6.1Imports -4.8 9.8 4.0 -1.2 4.2 4.5 4.4 4.4 4.3 3.9 3.4 3.2 1.4 3.6 4.1Employment 0.4 0.3 1.4 2.0 1.0 0.8 0.6 0.7 0.9 1.0 0.9 0.8 0.8 1.1 0.9Unemployment Rate (%) 7.0 7.0 6.9 6.6 6.7 6.8 6.9 6.9 6.9 6.8 6.8 6.7 6.9 6.8 6.8Productivity (Real GDP/worker) 1.3 2.0 1.7 1.5 1.3 0.6 0.5 0.7 1.1 1.3 1.2 1.2 1.7 0.8 1.2Personal Savings Rate (%) 2.5 -2.0 2.6 3.8 3.9 4.4 4.6 4.5 4.5 4.5 4.5 4.7 4.2 4.4 4.5

Source: TD Economics, Quarterly Economic Forecast - Canadian Outlook, January 26, 2015.*Actual data or most recent estimates.

Category2014 2015 2016 Annual Average

CONSUMER SPENDINGHeading into 2015, Canadians should expect to receive some relief from lower gasoline prices. Forecasters estimate that lower prices at the pump will save the average household about $300 in 2015, or the equivalent of $4.0 billion on a national level.104

The decline in gasoline prices was perhaps related to the surge in auto sales observed in late 2014. Passenger vehicle sales increased by 16 per cent year-over-year in December 2014, the strongest gain since mid-2012, and helped to lift annual sales to a record 1.85 million units.105 Similar to the case of the U.S, much of Canada’s recent growth in the auto sector was driven by light truck sales, which were up 20 per cent year-over-year in December. Sales were particularly strong for pickup trucks, which were up nearly 30 per cent over the year. The increasing tendency of North Americans to purchase autos that are relatively less efficient in terms of fuel usage may suggest some upside risk to oil prices due to rising demand.

Encouraged by modest but steady employment growth, consumer spending growth averaged 2.8 per cent in 2014. While the savings generated through lower gasoline prices should carry over to increased expenditure in other retail sectors, forecasters anticipate that a number of factors will act to slow spending growth over the next two years.

Job creation is expected to remain relatively soft over the near-term horizon. While many consumers and businesses will benefit from lower oil prices and a depreciated Canadian dollar, energy and public sector weakness will weigh on the employment and income outlook, and the boost to exporters may not necessarily translate into sizeable job gains.



103 TD Economics, Economic Forecast Update, January 26, 2015.104 TD Economics, Canadian Outlook: Falling Price of Oil is the Name of the Game, December 17, 2014.105 Scotia Economics, Auto News Flash, January 5, 2015.

“In addition to softness in resource hiring, ongoing government restraint – notably at the provincial level – is expected to put ongoing pressure on public sector payrolls. Moreover, large exporters tend to be more capital intensive (and less labour intensive) than other areas of the economy, suggesting that the transition to more export-led growth will not result in a significant hiring boom.”106

As well, consumer price inflation is expected to remain relatively resilient even in the prevailing environment of lower gas prices. Canada’s output remains near its potential level, which should apply some upward pressure to price levels.107 A depreciated Canadian dollar will also make imports relatively more costly, with at least some proportion of these higher prices passed on to consumers. Core inflation is expected to accelerate to an average of about 2.0 per cent in 2015 and 2016, potentially discouraging consumer spending growth.

Debt accumulation among Canadian consumers slowed through 2014 and is expected to decelerate further, even in light of the Bank of Canada’s surprise cut to its key overnight target interest rate in early 2015. While higher interest rates appear to be on hold until 2016, much of the pent-up demand for durable goods (such as autos) appears to have been largely satisfied.108 Growth in consumer spending on durable goods is expected to slow from 5.8 per cent in 2014 to 4.3 per cent in 2015, decelerating further to 2.0 per cent by 2016.

While consumers should continue to contribute substantially to GDP growth, spending is projected to slow into 2015 and 2016 at rates of 2.3 per cent and 1.9 per cent respectively.

BUSINESS CONFIDENCEIn late 2014, the impact of lower oil prices was observed through generally dampened levels of business optimism. The Bank of Canada’s Winter Business Outlook Survey (conducted between mid-November and mid-December 2014) suggested that the general outlook, while remaining in positive territory on balance, had moderated significantly relative to prior surveys.

The balance of opinion on future sales (the proportion of respondents expecting an improvement minus the proportion expecting a reduction) declined to +8 per cent in the fourth quarter survey, the lowest reading since the third quarter of 2012 and a significant decline relative to a balance of +35 per cent in the third quarter 2014 survey.109 Similarly, investment intentions remained positive on balance but the measure moderated to +8 per cent in the final quarter of 2014, down from +20 per cent the previous quarter and +24 per cent in the second quarter of 2014. Business investment has been a weak spot in the Canadian economy and the results of the survey suggested that a sustained recovery was unlikely in the near-term. However, investment intentions varied significantly across regions and sectors of the economy.

“Weakening in investment intentions was reportedly largely concentrated among firms in western Canada where lower oil prices weighed on investment intentions. Firms in eastern and central Canada are reportedly planning to increase investment with reports of higher investment intentions particularly concentrated in the manufacturing sector.”110



106 TD Economics, Canadian Outlook: Falling Price of Oil is the Name of the Game, December 17, 2014.107 Ibid.108 MarketWatch, Canada’s economy to benefit from broader export demand in 2015: RBC Economics, December 12, 2014.109 RBC Economics, Bank of Canada’s Winter BOS points to continued growth although business investment concerns emerging, January 12, 2015.110 Ibid.

On the positive side, hiring intentions remained robust with a +31 per cent balance of opinion. While this reading was down from +44 per cent in the third quarter survey, it was above the second quarter reading of +28 per cent.111 Again, survey responses on this measure varied according to region and sector, with substantially diminished hiring intentions in Western Canada relative to the rest of the country, and a greater degree of optimism among firms expecting to benefit from an improved U.S. outlook relative to domestically oriented firms.

As well, firms reported an easing in credit conditions in the winter survey, though to a much lesser extent than was observed in prior surveys. Most businesses characterized credit as being easy to obtain, but the slowing in the measure may imply that a floor had been reached in terms of credit availability where further easing will be limited.

The results of the winter survey suggested that the collapse in oil prices had induced a mixed, but net negative response from businesses. Given that the timing of the survey captured only some of oil’s decline (WTI oil prices averaged about $69 per barrel during the survey period and later fell to below $50) it is possible that a further deterioration in overall Canadian business sentiment will emerge.112

Canada’s manufacturing sector, which is expected to be a key beneficiary of lower energy prices and depreciated dollar, remained firmly in expansionary territory late in 2014 according to RBC’s Canadian Manufacturing Purchasing Managers’ Index. The index accounts for current and projected levels of new orders, output, hiring, inventories and delivery times. While a slight moderation in overall conditions was observed in December 2014 relative to November, most major components of the index remained positive on balance.113 Slower growth in exports was the most disappointing aspect of December’s manufacturing report, despite respondents noting higher levels of demand from the U.S, Mexico, and Brazil. Rising exports are projected to be a primary driver of Canadian growth in 2015.

TRADEFollowing surpluses in six of the prior nine months, Canada’s merchandise trade balance deteriorated to a deficit of $600 million in November 2014.114 Exports fell 3.5 per cent on the month to their lowest level since April 2014, representing the largest monthly decline since the Japanese earthquake and tsunami of February 2011.115 Imports were also down by 2.7 per cent on the month.

Unsurprisingly, exports of energy products provided the most significant downward drag to November’s trade figures. Energy exports declined for the sixth consecutive month (-7.8 per cent), with crude oil exports down 9.9 per cent due to both lower prices and volumes.116 Declining oil prices and export volumes led to a severe narrowing of Canada’s energy trade surplus to a year-low of $6.3 billion, down from a record $8.2 billion in March 2014.117

Along with weaker energy exports, diminished trade levels were prevalent across most goods sectors in November. While Canada’s non-energy trade deficit improved slightly on the month, it remains close to a record high.



111 TD Economics, Data Release: Oil price collapse hits business outlook in Q4, January 12, 2015.112 RBC Economics, Bank of Canada’s Winter BOS points to continued growth although business investment concerns emerging, January 12, 2015.113 RBC Economics, RCB Canadian Manufacturing PMI moderated in December, January 2, 2015.114 BMO Economics, EconoFACTS: Trade Deficit Deepens as Oil Slides, January 7, 2015.115 Scotia Economics, Foreign Exchange Outlook, January 2015.116 Scotia Economics, Canada’s Q4 Trade Picture Worsens, January 7, 2015.117 BMO Economics, Focus, January 9, 2015.

“While the drop in exports was led by energy products, the weakness is broad across most exports, with 9 out of 12 sectors seeing declines. Metal and non-metallic mineral products are the other major source of weakness, down 8.3% m/m. Within imports, 10 out of 11 sectors fell on the month, with the largest declines in aircraft, electrical equipment and consumer goods. Only auto imports (+1.2%) increased on the month.”118

On average over the fourth quarter of 2014, exports were trending 8.0 per cent lower relative to the previous quarter and imports nearly 1.0 per cent lower. Canada’s trade deficit was expected to widen further into December, as oil prices fell nearly $20 over the month, which should cut more than $1 billion from energy exports assuming steady volumes.119 Nevertheless, owing to strong gains earlier in 2014, export volumes were still up 5.2 per cent year-over-year in November and remained on track to post its largest contribution to annual GDP since 1999.120

Going forward, lower oil prices will continue to weigh on the Canada’s trade balance. While it wasn’t at all evident in November’s data, forecasters anticipate that stronger growth in the U.S. economy and a depreciated Canadian dollar should provide some support to non-energy exporters into 2015.121 Specifically, a broadening in export demand into 2015 is expected to be driven by increased machinery and equipment investment in the U.S, as well as rising auto sales and housing starts.

“U.S. housing starts are continuing a multi-year upward trend, supported by strength in both multi-unit dwellings and single-family homes, which has led to a nearly 10% jump in Canadian forest product exports this year. Softwood lumber is a key component of U.S. home building, and accounts for about a fifth of Canadian forest products exports.”122

Canadian Real Trade Balance, 2007 to 2014

Source: Scotia Economics



118 Scotia Economics, Canada’s Q4 Trade Picture Worsens, January 7, 2015.119 BMO Economics, Focus, January 9, 2015.120 RBC Economics, Canada trade balance posted a $0.6 billion deficit in November, January 7, 2015.121 BMO Economics, EconoFACTS: Trade Deficit Deepens as Oil Slides, January 7, 2015.122 Scotia Economics, Global Views, December 12, 2014.

HOUSING MARKETCanada’s housing market continued to show strength throughout most of 2014 with new construction activity, sales and prices up moderately from 2013 levels. However, in December 2014 the number of housing starts fell 6.5 per cent on the month to reach a nine-month low of 180,600 annualized units.123 Monthly declines were observed for both single-units (-4.8 per cent) and multi-units (-7.0 per cent). For the quarter as a whole, annualized housing starts averaged 188,000 units – the weakest fourth quarter since 2009. Much of the fourth quarter’s downturn was due to fewer starts in Alberta, Saskatchewan and Manitoba, where starts fell by about 10 per cent consecutively in November and December.124 Largely reflecting the impact of lower oil prices in Western Canada, new construction activity is expected to slow somewhat in 2015 to about 185,000 units.

“…The downward trend in housing starts seen in the latter half of the year appears likely to continue. Although interest rates are expected to remain low through 2015, their impact on the housing market will decline as pent-up demand is run down. Moreover, the sharp decline in oil prices since the summer of last year is likely to have an impact on areas that are reliant on the resource sector. In particular, Calgary, Edmonton, and other cities in the Prairies are likely to see additional softening in 2015.”125

Consistent with a projected slowing in housing starts, residential building permits edged down 3.1 per cent in December.126 Despite the monthly moderation, the level of building permits has remained generally elevated with December’s reading marking the seventh consecutive month of permits outnumbering housing starts.

Home sales were also down late in 2014 according to the Canadian Real Estate Association. Existing home sales fell 5.8 per cent in December, the largest monthly decline since 2010.127 Declining sales were observed in most large Canadian markets, with the strongest drops in commodity-driven regions such as Edmonton (-26.4 per cent), Calgary (-24.6 per cent), Regina (-12.3 per cent) and Saskatoon (-12.2 per cent). Nonetheless, sales were still up nearly 8.0 per cent year-over-year on a national level in December; and a sales-to-listings ratio of 51 remained firmly in the balanced range of 40 to 60.

Average national home price growth decelerated in December 2014 to 3.8 per cent year-over-year from 5.6 per cent in November.128 While price growth slowed in tandem with softening housing market activity, notable gains were recorded in nine of Canada’s eleven largest cities, led by Calgary (8.3 per cent), Hamilton (7.8 per cent), Toronto (7.2 per cent) and Edmonton (5.8 per cent).129 Home price growth is expected to cool further to an average of about 2.0 per cent in 2015.



123 RBC Economics, Canadian housing starts fall to a nine-month low in December, January 9, 2015.124 TD Economics, Data Release: Canadian housing starts end 2014 on a down note, January 9, 2015.125 Ibid.126 BMO Economics, EconoFACTS: Cdn Homebuilding Sturdy in 2014, January 9, 2015.127 TD Economics, Data Release: Canadian housing market losing steam in December, January 15, 2015.128 Scotia Economics, Housing News Flash, January 15, 2015.129 TD Economics, Data Release: Home prices moderating in December but remain elevated, January 14, 2015.

Actual and Forecasted Housing Starts and Existing Home Sales, CanadaQ1 2014 to Q4 2016

Source: TD Economics, Quarterly Economic Forecast, December 17, 2014

The sustained decline in oil prices is likely to temper housing market activity and price growth in Western Canada; and already-elevated price levels in other major markets may have difficulty moving higher. However, a severe downturn is not anticipated on a national level. While activity may be divergent on a regional basis, persistently low borrowing costs, favourable demographics, and stable employment gains should continue to support the housing market through 2015.

“…December does set the stage for a long-anticipated moderation in Canadian housing activity to start in 2015. The slump in oil prices is likely to trigger a housing downturn in commodity-driven markets, like Calgary and Edmonton – markets that were once expected to be among the strongest. A continued low interest rate environment may result in a pick-up in housing activity in non-commodity driven markets next year. However, already elevated home prices may limit activity in key markets like Toronto and Vancouver.”130

OILAfter reaching a high of more than US$100 per barrel in June 2014, the benchmark price of West Texas Intermediate (WTI) oil fell consistently through the remainder of the year to below US$50. Similarly, the per barrel benchmark price of Western Canada Select (WCS) heavy oil declined from nearly US$90 to less than US$40 over the same period. From the perspective of Canadian oil producers, one positive development has been a general narrowing of the WCS price discount relative to WTI. Through the latter half of 2014 and into early 2015, oil prices plunged to their lowest levels since the depths of the recession in early 2009.



130 TD Economics, Data Release: Canadian housing market losing steam in December, January 15, 2015.

Monthly Average Price of West Texas Intermediate (WTI), Western Canada Select (WCS), Price Differential, January 2012 to December 2014

Source: Government of Alberta, Economic Dashboard – Energy Prices

While the impact of diminished oil sector investment will be most acutely felt in Alberta, where the majority of direct oil employment occurs and where royalties account for one quarter of provincial government revenues,131 energy is a crucial sector of the Canadian economy. In 2013, the capital-intensive energy sector represented 13.4 per cent of Canada’s GDP and 5.0 per cent of total employment through direct and indirect channels.132 Energy products are also a critical component in Canada’s trade balance, accounting for 25 per cent of Canada’s total exports in 2013. The sector is also important in funding government revenues, with 12 per cent of taxes paid across all levels of government between 2008 and 2012 related to energy.

The first clear consequence of lower oil prices in Canada was an announced reduction in planned investment spending on part of energy companies late in 2014. Energy-related investment amounted to $83 billion in 2013, or about 21 per cent of total capital spending in Canada.

“Cenovus Energy recently announced a 15% drop in planned cap-ex for 2015 compared to 2014, announced further declines in 2016-17, and warned it would further review plans in early 2015. Canadian Oil Sands Ltd also recently announced that cap-ex spending in 2015 would be about 40% lower than 2014 significantly because key projects are coming to a close. Precision Drilling announced plans to reduce capital spending by 44% in 2015 over 2014.”133

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131 National Post, Coyne: Canada’s economy – even Alberta’s – will survive oil price volatility, December 1, 2014.132 Scotia Economics, Global Views, December 19, 2014.133 Scotia Economics, Global Views, December 19, 2014.

The drop in crude oil prices will significantly dampen corporate profits in Canada over the next few quarters. Following a strong 11.6 per cent annualized increase in the third quarter of 2014, pre-tax profits are expected to drop by at least 10 per cent through the fourth quarter of 2014 and the first quarter of 2015.134 Most of the risk to profits flows to Canadian shareholders since only about 35 per cent of Canada’s energy sector is foreign owned.

Actual and Forecasted Non-Residential Investment and Pre-Tax Corporate ProfitsQ1 2014 to Q4 2016

Source: TD Economics, Economic Forecast Update, January 26, 2015

There are, however, a number of upside risks to the Canadian economy related to lower oil prices. A stronger U.S. economy and a weakening of the Canadian dollar provide a larger market for Canadian exporters along with enhanced trade competitiveness.135 Further, cheaper gasoline prices are projected to offset some of the decline in investment through increased retail spending.

“It is of note that while business investment is a sizeable 13.0% of nominal GDP (including investment in intellectual property products), consumer spending is a massive 54.3%. Thus a small rise in consumer spending can go a long way to offsetting a marked drop in investment.”136

Oil price forecasts were repeatedly downgraded through the fourth quarter of 2014 and into 2015 as analysts wondered how low prices could go. At the recent low price levels (around US$50), oil demand is likely to firm in the coming months while some marginal production and investment in the industry will be curtailed.137 The per barrel price of WTI is generally expected to remain subdued at an average of US$47 in 2015, rising to an average of US$65 in 2016.138 The price of WCS is expected to follow a similar trajectory, with an average discount of about $15 per barrel.

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134 TD Economics, Canadian Outlook: Falling Price of Oil is the Name of the Game, December 17, 2014.135 RBC Economics, Accounting for the Impact of Lower Oil Prices on the Canadian Economy, January 2015.136 Ibid.137 TD Economics, Canadian Outlook: Falling Price of Oil is the Name of the Game, December 17, 2014.138 TD Economics, Canadian Forecast Update, January 26, 2015.

POPULATIONAt the end of the third quarter of 2014, the population of Canada was estimated at 35,675,800, up 135,400 from the end of the second quarter. This change represented a national quarterly population growth rate of about 0.4 per cent – a rate similar to that of the third quarter of 2013.139

Natural increase, defined as the difference between the number of births and deaths, accounted for 41,900 (31 per cent) of third quarter population growth in 2014, and was the result of 103,500 births and 61,600 deaths. Net international migration of 93,500 accounted for Canada’s remaining population growth (69 per cent).

As has been the case in recent years, third quarter population growth was again weighted toward Canada’s western provinces, with growth in Alberta (0.6 per cent) and British Columbia (0.6 per cent) significantly above the national average (0.4 per cent).



139 Statistics Canada, The Daily, Canada's population estimates, third quarter 2014, December 17, 2014.

Alberta EconomyAlberta’s economy grew at a healthy pace in 2014. However, the dramatic drop in crude oil prices since mid-2014 has had forecasters scrambling to lower their growth forecasts for 2015 and 2016.

Preliminary estimates for real GDP growth in Alberta in 2014 average 3.9 per cent140, matching the pace of growth in 2013. The Conference Board of Canada’s November 2014 forecast is a little more optimistic at 4.4 per cent.

“Alberta’s economy performed well in 2014, with all of its major economic indicators leading the country, and we expect overall real GDP growth for the year to come in at 4.4 per cent. But preliminary estimates suggest that Alberta’s economy is probably facing a recession in 2015, with a decline in real GDP between 1 and 2 per cent. That is in sharp contrast to the robust performance of the five previous years...”141

With the exception of agriculture, output growth is expected to be positive across all major industry categories in 2014, led by transportation and warehousing (+7.5 per cent), mining (+6.5 per cent), wholesale and retail trade (6.2 per cent), construction (+5.9 per cent) and manufacturing (+5.4 per cent).

Contributions to Alberta Real GDP Growth, Select Industries2014 Estimate

Source: Conference Board of Canada, Provincial Outlook: Alberta, Economic Forecast, Autumn 2014.

!10%%!8%% !6%% !4%% !2%% 0%% 2%% 4%% 6%% 8%%

Agriculture%

Public%administra:on%

Community,%bus.%&%personal%services%

Finance,%insurance%&%real%estate%

Manufacturing%

Construc:on%

Wholesale%&%retail%trade%

Mining%

Transporta:on%&%warehousing%

All%industries%

%"change"



140 RBC Economics, Provincial Outlook Update, February 6, 2015; TD Economics, Canadian Provincial Economic Forecast Update, January 26, 2015; BMO Economics, Provincial Economic Outlook, February 20, 2015; CIBC Economics, Provincial Outlook 2015, February 17, 2015; Scotia Economics, Global Forecast Update, February 3, 2015.141 Conference Board of Canada, Provincial Outlook Alberta, Economic Forecast, Autumn 2014, p.65.

ALBERTA ECONOMY AT A GLANCE




Real GDP (% change)

2015 (f)

2014 (f) 2013

Real GDP (% change)

0.4 3.9 3.9

WTI Price (US$/barrel)

Dec 2014

Nov 2014

Dec 2013WTI Price

(US$/barrel)59 76 98

Alberta Nat. Gas Ref. Price (ARP) (C$/GJ)

Dec 2014

Nov 2014

Dec 2013

Alberta Nat. Gas Ref. Price (ARP) (C$/GJ) 3.39 3.47 3.22


Dec 2014

Nov 2014

Dec 2013CPI Inflation

(% change)1.9 2.0 2.1

Housing Starts (thousands of units)

2015 (f) 2014 2013Housing

Starts (thousands of units) 36.00 40.59 36.01

Building Permits ($ billion)

Dec 2014

Nov 2014

Dec 2013Building

Permits ($ billion) 1.69 1.29 1.36

Retail Sales ($ billion)

Dec 2014

Nov 2014

Dec 2013Retail Sales

($ billion)6.46 6.62 6.20

Wholesale Sales ($ billion)

Dec 2014

Nov 2014

Dec 2013Wholesale

Sales ($ billion) 7.17 7.15 6.55

Average Weekly Earnings ($)

Nov 2014

Oct 2014

Nov 2013Average

Weekly Earnings ($) 1,162 1,164 1,137

EI Beneficiaries (thousands of persons)

Dec 2014

Nov 2014

Dec 2013

EI Beneficiaries (thousands of persons) 29.7 29.1 30.8


Q3 2014

Q2 2014

Q3 2013Population


The Alberta economy is expected to slow substantially in 2015, and there is debate as to whether the province will enter a recession. Real GDP growth forecasts for 2015 range between -0.3 per cent and +0.9 per cent.

Although all the major financial institutions are projecting real GDP growth of less than 1.0 per cent for the province in 2015, Scotia Economics and RBC Economics are at the higher end of the forecast range. RBC Economics is forecasting growth of 0.6 per cent for Alberta in 2015, but acknowledges the risk of a recession.

“... we now expect Alberta’s economy to show substantial deceleration from an estimated real GDP growth of 4.1% in 2014 to a rate of just 0.6% in 2015 (down from 2.7% in our December outlook). The risk of a recession in Alberta cannot be dismissed; however, we believe that it will be averted under our assumption of rising oil prices starting by the middle of this year, which would help rebuild confidence in the province and prevent activity from entering a full-blown contractionary spiral.142

CIBC Economics is projecting the Alberta economy will contract by 0.3 per cent in 2015.

“Budget season is upon us, and for Canada’s provinces, it will be a very different game than the one played out only a year earlier. A dramatic drop in oil prices, juxtaposed against a still-healthy US economy, has turned the tables on relative provincial growth with Alberta at risk of a recession, but central Canada’s prospects brightening. [...] A glance at our projections for major indicators shows just how sharply the growth leadership is likely to swing. Alberta looks headed for a mild, and short-lived recession. Even if we had a small positive for annual real GDP growth, that would have included at least two negative quarters, and nominal GDP would be well into negative territory.”143

Alberta’s economic prospects are expected to improve gradually in 2016, with real GDP growth forecasts in the range of 0.9 per cent and 2.3 per cent.

Alberta Economic OutlookForecasted per cent change in Real GDP 2014 - 2016

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142 RBC Economics, Provincial Outlook Update, February 6, 2015, p.1.143 CIBC Economics, The Tables Have Turned: Provincial Outlook 2015, February 17, 2015, p.1.

ENERGY INDUSTRYCanadian energy companies will continue to boost production over the next two years, although at a slower rate than was previously anticipated. Western Canadian crude oil production is now forecast to increase from 3.458 million barrels per day (b/d) in 2014 to 3.615 million b/d in 2015, according to the Canadian Association of Petroleum Producers January 2015 Forecast Update. CAPP’s June 2014 forecast projected crude oil production in Western Canada would reach 3.681 million b/d in 2015. This translates into a downward revision of about 65,000 b/d. The revision to 2016 is even more pronounced (-120,000 million b/d), from 3.932 million b/d in the June 2014 forecast to 3.812 million b/d in the January 2015 forecast.

“These conditions are due to lower oil prices and the significant cost burden on the industry. CAPP’s forecast is a snapshot in time and the industry will remain nimble to respond appropriately when conditions change. If pricing declines continue, CAPP anticipates further revisions could occur.”144

Western Canadian Crude Oil Production ForecastJune 2014 Forecast vs. January 2015 Forecast

Source: CAPP January 2015 Capital Investment & Drilling Forecast Update, January 21, 2015.

CAPP also projects a 33 per cent drop in short-term capital spending in 2015. Conventional and oil sands capital investment in Western Canada is forecast to total $46 billion in 2015, down from $69 billion in 2014. Capital spending in Western Canada’s conventional oil and gas sector is projected to decline from $36 billion in 2014 to $21 billion in 2015. In the oil sands, capital investment is expected to decrease from $33 billion in 2014 to $25 billion in 2015.145

“These are challenging times and Canadians across the country will see or feel the impacts. [...] Purchases will be down, including purchases from the more than 2,300 businesses from coast to coast, excluding Alberta, that sell goods and services directly to the oil sands. Investors have seen their portfolios shrink. And governments

1350% 1335% 1409% 1342% 1420% 1356%

2106% 2123% 2272% 2273% 2512% 2456%

0%500%

1000%1500%2000%2500%3000%3500%4000%

2014E%June%2014%

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2014E%January%2015%

Forecast%

2015F%June%2014%

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2015F%January%2015%

Forecast%

2016F%June%2014%

Forecast%

2016F%January%2015%

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144 Canadian Association of Petroleum Producers, News Release, Increased access to markets remains critical despite recent oil price decline, January 21, 2015.145 Ibid.

will see reduced revenues from the industry’s royalty and tax payments. We all will feel the effects.”146

Oil and gas field activity is also expected to slow. According to the Canadian Association of Oilwell Drilling Contractors (CAODC), the number of active drilling rigs in Western Canada is forecast to drop 41 per cent in 2015, from an average of 370 per day in 2014 to just 203 per day in 2015. Rig utilization is also projected to fall to 26 per cent in 2015, from 46 per cent in 2014.147

The CAODC forecasts a significant decline in employment in the oil patch as a result of decreased drilling activity. Related job losses are projected to reach as high as 23,000 in 2015, reflecting losses of 3,400 direct jobs and 19,500 indirect jobs relative to 2014.148

“Times like this are tough not just on contractors, but on their employees as well. If there are not as many drilling rigs working, there will not be as many rig workers on the job. This will have significant adverse effects on indirect employment throughout the economy, well beyond just rig workers.”149

MAJOR CONSTRUCTION PROJECTSAs of December 2014, there was an inventory of 765 major construction projects (a minimum estimated construction cost of $5 million) at various stages of development in Alberta,150 valued at an estimated $207.9 billion. Oil sands projects accounted for 49 per cent of the value of the projects ($107.2 billion) while pipeline and oil and gas projects accounted for an additional 21 per cent ($46.5 billion).

Inventory of Major Alberta Projects

Project Sector# of

Projects

Value of Projects

($millions)% of Total

Oil Sands 57 107,246.0 48.8%Pipelines 41 28,189.2 12.8%Oil and Gas 13 18,305.0 8.3%Power 23 13,167.8 6.0%Infrastructure 169 9,953.0 4.5%Commercial / Retail 85 9,382.4 4.3%Institutional 101 6,291.1 2.9%Tourism / Recreation 104 4,396.2 2.0%Commercial / Retail and Residential 16 4,092.4 1.9%Residential 134 3,993.3 1.8%Chemicals and Petrochemicals 2 1,550.0 0.7%Mining 2 470.0 0.2%Agriculture and Related 5 355.8 0.2%Biofuels 2 300.0 0.1%Other Industrial 7 122.6 0.1%Manufacturing 2 97.0 0.0%Forestry and Related 1 15.0 0.0%Telecommunications 1 8.0 0.0%Total 765 207,934.8$ 100%Source: Alberta Enterprise and Advanced Education, as of December 2014



146 Canadian Association of Petroleum Producers, News Release, Increased access to markets remains critical despite recent oil price decline, January 21, 2015.147 Canadian Association of Oilwell Drilling Contractors, Media Room, Oil Drillers Buckling In as Prices Decline, January 22, 2015.148 The impact on employment assumes 20 direct jobs per rig and 115 indirect jobs per rig.149 Ibid.150 Includes projects that are proposed, announced, under construction, nearing completion, completed and on hold.

In comparison, there was an inventory of 746 major construction projects in Alberta in December 2013, valued at an estimated $220.4 billion. Oilsands projects accounted for 57 per cent of the value of the projects ($126.6 billion) and pipeline and oil and gas projects accounted for another 18 per cent ($38.7 billion).

Alberta’s energy exports rose 21 per cent year-over-year to $91.3 billion in 2014, accounting for 75 per cent of the province’s total international merchandise exports. Higher prices and volumes of crude oil exports were the main drivers of Alberta’s energy export growth. In 2014, crude oil exports rose 18 per cent to $76 billion; oil export volumes rose 13 per cent and oil prices rose 5.0 per cent.151 Since 2004, energy exports have increased 115 per cent.152

Alberta Energy Exports ($billions)2004 - 2014

Source: Statistics Canada and Alberta Innovation and Advanced Education

Looking ahead, Export Development Canada (EDC) is forecasting Alberta’s energy export growth to slow to just 3.0 per cent in 2015 due to lower crude prices offsetting gains in trade volume.

“The top performing export sector this year will be energy, chalking up double-digit gains. Powering growth are better prices and increased volumes, facilitated by the easing of transportation bottlenecks and by US refinery reconfigurations that allow American facilities to handle Alberta crudes.”153

HOUSING MARKETHousing starts in Alberta reached 40,590 units in 2014, a 12.7 per cent increase from 2013. Across major urban centres in the province, Calgary recorded the highest annual growth rate in housing starts in 2014 (+36 per cent), followed by Grande Prairie (+23 per cent), Red Deer (+11 per cent), Lethbridge (+4.3 per cent) and Medicine Hat (+3.4 per cent). Annual housing starts declined 5.6 per cent in Edmonton and 47 per cent in Wood Buffalo. According to the Canada Mortgage and Housing

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151 Albertacanada.com, Economic Dashboard, Merchandise Exports.152 Statistics Canada, Table 228-0060.153 Export Development Canada, Global Export Forecast, Fall 2014, p.24.

Corporation, “supply in the Wood Buffalo resale market is elevated relative to demand, thus competing with new home sales.”154

Single-detached starts in Alberta amounted to 19,563 units in 2014, a 6.1 per cent increase compared to 2013. Multi-family starts rose to their highest level since 1978, increasing 19.6 per cent year-over-year to 21,027 units in 2014.

Alberta housing starts are forecast to decline 11.3 per cent in 2015 to 36,000 units and by an additional 4.2 per cent in 2016 to 34,500 units.

“With Alberta’s economy and key housing drivers moderating, so too will housing demand. [...] Single-detached starts are projected to decline to 18,800 units in 2015 and 18,500 in 2016. Supply levels in the resale market are projected to rise over the forecast period offering consumers more choice while increasing competition to new home sales. [...] Alberta’s multi-family starts are forecast to decline to 17,200 in 2015 and 16,000 in 2016. The elevated supply of multi-family units will temper new construction in the coming years.”155

Alberta Total Housing Starts, Actual and Forecast

Source: Canada Mortgage and Housing Corporation

RENTAL MARKETAlberta’s apartment vacancy rate rose to 2.1 per cent in October 2014, from 1.6 per cent in October 2013. A moderation in net migration and a higher supply of rental units were the main reasons for the increase in the overall vacancy rate.156

“The demand for rental units and low vacancy rates in Alberta has encouraged new rental construction in recent years with the number of purpose-built rental apartment starts consistently increasing year-over-year since 2010. Between the 2013 and 2014 October surveys, the provincial rental apartment universe experienced a net gain of 2,009 units, which contributed to the recent rise in vacancies. Further

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154 Canada Mortgage and Housing Corporation, Housing Now Prairie Region, First Quarter 2015, p.2.155 Canada Mortgage and housing Corporation, Housing Market Outlook Prairie Region Highlights, Released First Quarter 2015, p.2.156 Canada Mortgage and Housing Corporation, Rental Market Report, Alberta Highlights, Fall 2014, p.2.

additions to the rental market universe will occur in future surveys, as there were over 5,000 rental units under construction in September 2014.”157

Among the province’s largest urban centres, Grande Prairie (1.2 per cent) and Calgary (1.4 per cent) had the lowest apartment vacancy rates in October 2014. Wood Buffalo recorded the highest vacancy rate in Alberta in 2014 at 11.8 per cent, up significantly from 5.4 per cent in October 2013.

“Unlike other markets in Alberta, the overall vacancy rate in Wood Buffalo is influenced by many unique characteristics that affect the rental market. For example, the prevalence of alternative housing options such as work camps with fly-in-fly-out services satisfies some of the demand that strong employment growth and net migration would otherwise have on the traditional rental market.”158

Private Apartment Vacancy Rates in Alberta and Alberta’s Largest Urban CentresOctober 2013 and 2014

Source: Canada Mortgage and Housing Corporation, Rental Market Report, Alberta Highlights, Fall 2014.

The average rental price for a two-bedroom apartment in Alberta rose to $1,238 per month in October 2014, from $1,158 per cent in October 2013. Among the province’s largest urban centres, Wood Buffalo had the highest average rent for a two-bedroom apartment in October 2014 at $2,118 per month, followed by Calgary ($1,322) and Edmonton ($1,227). Medicine Hat had the lowest average rent for a two-bedroom apartment in 2014 at $795 per month, up from $727 per month in 2013.

2.1%%

1.2%%

1.4%%

1.7%%

2.2%%

4.1%%

4.8%%

11.8%%

0.0%% 2.0%% 4.0%% 6.0%% 8.0%% 10.0%% 12.0%% 14.0%%

Alberta%

Grande%Prairie%

Calgary%

Edmonton%

Red%Deer%

Medicine%Hat%

Lethbridge%

Wood%Buffalo%

Vacancy&Rate&

OctI14%

OctI13%



157 Canada Mortgage and Housing Corporation, Rental Market Report, Alberta Highlights, Fall 2014, p.2.158 Ibid, p.3.

Private Apartment Average Rents (Two-Bedroom) in Albertaand Alberta’s Largest Urban Centres, October 2013 and 2014

Source: Canada Mortgage and Housing Corporation, Rental Market Report, Alberta Highlights, Fall 2014.

RETAIL SALESAfter hitting a record $6.69 billion in September 2014, retail sales in Alberta fell steadily through the final quarter of the year. In December 2014, retail sales in the province declined to $6.46 billion, down 2.5 per cent from the previous month. This was the largest monthly decline in over two years and the second lowest month for sales in 2014 (January 2014 sales were $6.41 billion).

“The obvious explanation for the pull-back in spending is the weakening price of crude oil and the impact that was starting to have on Albertans’ consumer confidence. At the beginning of December, the price of a barrel of West Texas Intermediate sold for $US 69, but slid to $US 53 by the end of the month. Given the importance of the petroleum industry to our provincial economy, job security was starting to erode—and not surprisingly, that began to weigh on consumer spending.”159

Falling gasoline prices was another reason for the drop in retail sales in December 2014. Sales at gasoline stations in Alberta fell 10 per cent month-over-month in December. In Calgary, the price for regular unleaded gasoline averaged 85.8 cents per litre at the end of December, down from 99.6 cents per litre at the beginning of December and down from over 120 cents per litre at the beginning of

!$1,238!!

!$795!!

!$898!!

!$966!!

!$1,155!!

!$1,227!!

!$1,322!!

!$2,118!!

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Alberta!

Medicine!Hat!

Lethbridge!

Red!Deer!

Grande!Prairie!

Edmonton!

Calgary!

Wood!Buffalo!

Oct,14!

Oct,13!

4"

4.5"

5"

5.5"

6"

6.5"

7"

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Jun*10"

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$Billions((seasona

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Source: Statistics Canada, CANSIM Table 080-0020



159 ATB The Owl, Albertans rein in their spending, February 20, 2015.

October. In Edmonton, gasoline prices followed a similar trend, hitting a low of 78.6 cents per litre at the end of December 2014.160

On an annual basis, retail sales in Alberta were up by a solid 4.2 per cent in December 2014. Year-over-year spending growth increased across all major retail categories in December, with the exception of gasoline stations, which decreased 8.7 per cent. The retail categories that posted the highest annual sales growth included building materials and garden equipment stores (+18.4 per cent), sporting goods, hobby, book and music stores (+13.3 per cent), furniture and home furnishings stores (+9.5 per cent) and motor vehicle and parts dealers (+8.6 per cent).

Year-Over-Year Change in Retail Spending Categories, Alberta December 2014


Alberta led the nation with retail sales growth of over 8.0 per cent in 2014, but the projected slowdown in the provincial economy will have ripple effects. Retail sales growth in Alberta is forecast to moderate significantly to 1.0 per cent in in 2015 and 3.4 per cent in 2016.161

The impact from the plunge in oil prices over the second half of 2014 is clearly on display [...]. Consistent with our Provincial Economic Forecast Update, the oil-producing regions – where incomes are projected to be most severely impacted by the decline in oil prices – are recording signs of weakness. [...] Looking ahead, real consumer spending is expected to moderate over the course of 2015. The recent rate cut by the Bank of Canada is expected to be followed by another 25 basis point cut in March which should help prop up household expenditures. Lower gasoline prices are also estimated to save the average Canadian household around $875 at the pump this year. On the other side of the coin, lower oil prices will also weigh on incomes and act as a headwind to consumer spending. Canadian households are also carrying high levels of debt, which will keep consumer spending in check in 2015.162

!10%% !5%% 0%% 5%% 10%% 15%% 20%%

Motor%vehicle%&%parts%dealers%Furniture%&%home%furnishings%

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Food%&%beverages%Health%&%personal%care%

Gasoline%staDons%Clothing%&%clothing%accessories%

SporDng%goods,%hobby,%book%&%music%General%merchandise%stores%Miscellaneous%store%retailers%

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160 Natural Resources Canada, Energy Sector, Energy Sources, Petroleum Products and Crude Oil Prices, Average Retail Prices for Regular Gasoline.161 TD Economics, Provincial Economic Forecast Update, January 26, 2015, p.3.162 TD Economics, Data Release: Retail sales fall in December, February 20, 2015.

Retail Trade Sales Forecast, Canada and Provinces, 2014 - 2016(annual average per cent change)

Source: TD Economics, Provincial Economic Forecast Update, January 26, 2015.

AVERAGE WEEKLY EARNINGSThe average weekly earnings of payroll employees in Alberta rose by $32 or 2.8 per cent year-over-year in November 2014 to $1,162. Earnings growth was led by gains in the utilities industry (+13 per cent), transportation and warehousing (+9.2 per cent), mining and oil and gas (+6.6 per cent) and public administration (+6.2 per cent). Nationally, average weekly earnings increased by $20 or 2.2 per cent to $941 over the same time period. On average, Albertans earned $221 more per week in November 2014 than the average Canadian.

Every province registered annual gains in average weekly earnings in November 2014, with Newfoundland and Labrador (+5.5 per cent), Prince Edward Island (+4.2 per cent), Saskatchewan (+3.4 per cent) and Quebec (+3.0 per cent) posting the highest growth rates.

With the exception of March, Alberta’s year-over-year growth in average weekly earnings outpaced growth in consumer inflation in every month of 2014. In November 2014, average weekly earnings increased by 2.8 per cent annually, while inflation rose by 2.0 per cent. Real earnings in Alberta, therefore, rose by about 0.8 per cent in November.

0.0%$1.0%$2.0%$3.0%$4.0%$5.0%$6.0%$7.0%$8.0%$9.0%$

Canada$

NL$

PE$

NS$

NB$

QC$

ON$

MB$

SK$

AB$

BC$

2014F$ 2015F$ 2016F$

$941%$1,022%

$784% $819% $835% $851%$941%

$869%$987%

$1,162%

$904%

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$400%

$600%

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$1,200%

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NL%

PE%

NS%

NB%

QC%

ON%

MB%

SK%

AB%

BC%

Average'Weekly'Earnings'of'Payroll'Employees'Canada'and'Provinces,'Seasonally'Adjusted'

Nov?13% Nov?14%




Average Weekly Earnings and Inflation in AlbertaPer cent change year-over-year

Source: Statistics Canada, CANSIM Table 281-0049 and 326-0020

EMPLOYMENT INSURANCEThe number of Albertans receiving regular Employment Insurance (EI) benefits declined 3.4 per cent year-over-year to 29,700 in December 2014. Approximately two-thirds of EI recipients in the province were in Calgary or Edmonton.

In Calgary, there were 9,530 regular EI beneficiaries in December 2014, down 5.8 per cent from 2013. The number of EI beneficiaries also declined 1.7 per cent year-over-year in Edmonton to 10,310 in December 2014. Five regions in Alberta recorded annual increases in the number of EI beneficiaries in December. The Lloydminster region recorded the highest year-over-year percentage increase in EI beneficiaries (+18 per cent), followed by Wetaskiwin (+10 per cent), Wood Buffalo (+9.5 per cent), Cold Lake (+7.1 per cent) and Okotoks (+5.9 per cent).

Forty-two per cent of EI beneficiaries in Alberta in December 2014 were in the trades, transport and equipment operator occupations – the only major occupation category to record an annual increase. Year-over-year, the number of regular beneficiaries in this category rose 1.2 per cent to 12,420.

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Regular Employment Insurance Beneficiaries by Occupation, AlbertaDecember 2013 and 2014


POPULATIONAccording to the most recent population estimates from Statistics Canada, Alberta’s population grew by 24,300 in the third quarter of 2014 to an estimated 4,146,000. This was the fifteenth consecutive quarter that the province recorded the highest quarterly population growth rate in the country (+0.59 per cent), just slightly ahead of British Columbia (+0.58 per cent). Canada’s population increased 0.38 per cent on a quarterly basis in the third quarter of 2014.

While Alberta continued to post healthy population gains in the third quarter of 2014, growth has moderated. The province gained 6,320 net interprovincial migrants, a solid showing but down from over 10,000 net interprovincial migrants in each of the third quarters of 2012 and 2013. The majority of net interprovincial migrants to Alberta came from Ontario (+2,677), Quebec (+2,110) and Manitoba (+1,016). Approximately 1,140 newcomers to the province came from one of the four Atlantic provinces. Alberta lost 77 net interprovincial migrants to Saskatchewan and 640 to British Columbia during the third quarter of 2014.

“This quarter marks some notable shifts in interprovincial migration patterns. Firstly, while Ontario continues to be a major source of interprovincial migrants moving to Alberta, this quarter’s net flow is the lowest since the end of 2011. Secondly, Alberta recorded a net loss to British Columbia for the first time since early 2011. As Ontario and British Columbia are historically large players in the interprovincial migration scene, these shifts may foreshadow lower gains for Alberta in the future.”163

Net international migration contributed 8,850 new residents over the third quarter of 2014. Migration from international and interprovincial sources (15,170) accounted for approximately two-thirds of Alberta’s population increase in the third quarter; with natural increase accounting for the remaining increase (9,130).

!"!!!! !2,500!! !5,000!! !7,500!! !10,000!!!12,500!!

Art,!culture,!rec.!&!sport!

Health!

Social!science,!ed.,!gov't!

Unique!to!processing,!

Unique!to!primary!industry!!

Natural!&!applied!sciences!!

Management!

Bus.,!fin.!&!admin.!!

Sales!&!service!!

Trades,!transp.!&!equip.!operators!!

Number'of'Regular'EI'Beneficiaries'

Dec"14!

Dec"13!



163 Alberta Treasury Board and Finance, Quarterly Population Report, Third Quarter 2014, p.2.

Components of Alberta's Population Growth

Source: Statistics Canada, CANSIM Tables 051-0037 and 051-0005

For the eighth consecutive quarter, Alberta recorded the highest annual population growth rate among provinces in the third quarter of 2014 at 2.6 per cent. This rate was more than double the national population growth rate of 1.1 per cent. Saskatchewan had the second highest annual population growth rate in the third quarter of 2014 at 1.6 per cent, and Manitoba placed third with a growth rate of 1.3 per cent. Newfoundland and Labrador and New Brunswick recorded annual population declines of 0.4 per cent and 0.1 per cent respectively.

Annual Population Growth Rates, Canada and Provinces, Q3 2014

Source: Statistic Canada Quarterly Demographic Estimates

!5,000%0%

5,000%10,000%15,000%20,000%25,000%30,000%35,000%40,000%

Q1%20

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Q2%20

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Calgary Region EconomyCalgary’s economy expanded by an estimated 4.0 per cent in 2014, up slightly from 3.8 per cent in 2013. Among the 13 census metropolitan areas (CMAs) in the Conference Board of Canada’s latest forecast, Calgary’s economic growth was outpaced only by Edmonton (+4.9 per cent) and Saskatoon (+4.2 per cent).164

“Once again, the goods sector will be the biggest contributor to growth [in Calgary in 2014]. Thanks to strong energy demand, primary and utilities output will continue to hum along. Meanwhile, construction activity is expected to stay robust, and a rebound is on tap for local manufacturers. However, services output is set to slow this year, as output growth in the public sector (health, education and government) will be modest and personal and business services activity will take a rest. ”165

Calgary CMA Real GDP Growth by Industry 166

2014 Forecast (annual growth rate)

Source: Conference Board of Canada, Metropolitan Outlook 1, Autumn 2014.

0%# 1%# 2%# 3%# 4%# 5%# 6%#

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164 Conference Board of Canada, Metropolitan Outlook 1, Autumn 2014, p.ix.165 Ibid, p.62.166 The office sector includes the information and cultural, finance, insurance and real estate, business services and public administration industries. The industrial sector includes the manufacturing, construction, and primary and utilities industries.

CALGARY ECONOMY AT A GLANCE




Real GDP (% change)

2015(f)

2014 (f) 2013

Real GDP (% change)

1.5 4.0 3.8


Dec 2014

Nov 2014

Dec 2013CPI Inflation

(% change)2.2 2.3 2.6

Housing Starts (thousands of units)

Q4 2014

Q3 2014

Q4 2013

Housing Starts (thousands of units) 3.3 4.5 3.8

Apartment vacancy rate (%)

2015 (f)

Oct 2014

Oct 2013Apartment

vacancy rate (%) 2.0 1.4 1.0

Building Permits ($ billion)

Q3 2014

Q2 2014

Q3 2013Building

Permits ($ billion) 2.13 2.05 1.99

Non-residential Construction ($ million)

Q4 2014

Q3 2014

Q4 2013

Non-residential Construction ($ million) 1051 1059 951

Overall Office Vacancy Rate (%)

Q3 2014

Q2 2013

Q3 2013

Overall Office Vacancy Rate (%) 8.6 8.3 6.6


2018(f) 2014 2013Population


More moderate growth of 1.5 per cent is projected for the Calgary CMA in 2015.167 The arts and entertainment, accommodation and food services and other services industries are forecast to have the highest GDP growth rate in 2015 at 2.8 per cent, followed by finance, insurance, real estate and leasing (+2.6 per cent), construction (+2.5 per cent) and wholesale and retail trade (+2.4 per cent).168

“Ongoing residential and non-residential projects, meanwhile, are likely to support further gains in the region’s construction sector in 2015. In addition, previous gains in employment, wages and population will generate growth in the service sector.”169

INFLATIONPlunging oil prices continued to put downward pressure on inflation in Calgary over the final quarter of 2014. Consumer prices in Calgary rose 2.2 per cent in the twelve months to December 2014, following a 2.3 per cent increase the previous month and a significantly higher 3.3 per cent increase in October 2014. Calgary recorded year-over-year price growth across most major consumer categories in December 2014, with the highest growth rates observed in food (+4.4 per cent), shelter (+4.4 per cent) and alcoholic beverages and tobacco products (+4.1 per cent). An 18 per cent increase in the price of meat drove much of the increase in the food category. The cost of clothing and footwear was virtually unchanged year-over-year in December (-0.2 per cent), while transportation prices declined 1.3 per cent over the same time period, driven by a 16 per cent drop in the price of gasoline.170

In Alberta, consumer prices rose 1.9 per cent year-over-year in December 2014, following a 2.0 per cent increase in November and a 3.0 per cent increase in October 2014. Similar to Calgary, the most significant price increases were in food (+4.0 per cent), alcoholic beverages and tobacco products (+3.8 per cent) and shelter (+3.5 per cent). A 17 per cent increase in the price of home and mortgage insurance and an 11 per cent rise in the price of natural gas drove much of the increase in the shelter category. The cost of clothing and footwear declined by a modest 0.5 per cent on an annual basis in December 2014, while the cost of transportation declined 1.6 per cent.171

Nationally, the inflation rate in December was 1.5 per cent, down from 2.0 per cent the previous month.

“Over the next few months, overall inflation could start to descend further, mainly reflected by even lower gasoline and energy prices. However, the inflation rate could move upwards as well. Canada’s sinking loonie triggered by oil’s price slide will force many retailers to raise prices to help cover import costs. This will subsequently cause goods to become more expensive and might nudge the inflation rate higher.”172



167 Calgary Real Estate Board 2015 Economic Outlook & Regional Market Forecast. p.8. Forecast source: Statistics Canada and the Conference Board of Canada.168 Ibid.169 Ibid.170 Statistics Canada CANSIM table 326-0020 and City of Calgary, December 2014 Inflation Review, January 23, 2015.171 Statistics Canada CANSIM table 326-0020.172 ATB Financial, The Owl, Inflation Puts on the Breaks, January 26, 2015.

All-Items Consumer Price Index, Canada, Alberta and CalgaryYear-Over-Year % Change, January 2011 - December 2014


HOUSING MARKETCalgary builders started 3,328 housing units in the fourth quarter of 2014, an 11.3 per cent decline from the final quarter of 2013. Single-family starts fell 9.9 per cent year-over-year to 1,422 units, while multi-family starts declined 12.3 per cent to 1,906 units. In spite of the decline in starts in the final quarter, annual production in 2014 totaled 17,131 units, a 36 per cent increase from the previous year.173

“...housing starts in Calgary reached a record in 2014 surpassing the previous high in 2006. [...] Very low multi-family inventory and sellers’ market conditions in Calgary’s resale market helped lift production in 2014.”174

Total annual housing starts in the Calgary CMA are forecast to decrease 21 per cent in 2015 to 13,600 units. Single-detached starts are expected to decline 6.1 per cent to 6,100 units, while multi-family starts are projected to fall almost 30 per cent to 7,500 units. In 2016, starts are projected to decline a further 11 per cent to 12,100 units, with single-detached starts decreasing slightly to 5,900 units and multi-family starts declining to 6,200 units.

“The reduction in total starts for both years [2015 and 2016] will be attributed to a moderation in employment growth, slower in-migration flows, as well as an expected uptick in mortgage rates. In addition, a rising inventory of complete and unabsorbed units and supply of existing homes will ease pressures for additional new construction.”175

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173 Canada Mortgage and Housing Corporation, Housing Now, Prairie Region, Released First Quarter 2015, p.19.174 Ibid, p.2.175 Canada Mortgage and Housing Corporation, Housing Market Outlook, Calgary CMA, Released Fall 2014, p.2.

Annual Housing Starts, Actual and Forecast, Single-Detached and MultipleCalgary CMA, 2011 - 2016


New housing prices in the Calgary CMA were up a nation-leading 7.0 per cent in 2014, according to Statistics Canada’s New Housing Price Index (NHPI). Nationally, the index rose 1.6 per cent year-over-year. New housing prices in the Edmonton CMA were virtually unchanged on an annual basis in 2014 (+0.1 per cent), while the Victoria, Charlottetown, Ottawa-Gatineau and Vancouver CMAs all posted annual price declines. Home builders in Calgary cited higher material and labour costs, higher land prices and weaker market conditions as the main reasons for the increase.176

“The New Housing Price Index measures changes over time in the selling prices of new residential houses agreed upon between the contractor and the buyer at the time of the signing of the contract. It is designed to measure the changes in the selling prices of new houses where detailed specifications pertaining to each house remain the same between two consecutive periods. The survey covers the following dwelling types: single dwellings, semi-detached houses and row houses (town houses or garden homes). The survey also collects contractors' estimates of the current value (evaluated at market price) of the land.”177

!"!!!!

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176 Statistics Canada, The Daily, New Housing Price Index, November 2014, January 8, 2015.177 Ibid.

Annual Change in New Housing Price Index (NHPI) Canada and Select CMAs in Canada, 2014

Source: Statistics Canada, CANSIM table 327-0046

Residential sales activity in the city of Calgary declined 7.5 per cent year-over-year in December 2014, which is not unusual around the holiday season according to the Calgary Real Estate Board (CREB). For 2014 as a whole, sales activity increased 9.3 per cent to 25,664 units, from 23,474 units the previous year.178

“Calgary’s resale housing market enjoyed a robust year in 2014. Housing demand growth was fueled by several factors, including employment and net migration growth, low lending rates and tight rental markets.”179

In 2014, single-family home sales in Calgary totaled 17,185 units, an increase of 5.5 per cent year-over-year. Single-family homes were on the market for an average of 31 days in 2014, down from 36 days in 2013, and the average price of a single-family home rose 6.9 per cent annually to $553,147.

Condo sales in Calgary (apartments and townhouses) increased 18 per cent year-over-year to 8,479 units in 2014. Both apartment condos and townhouse condos posted record years of sales activity. The average price of an apartment condo rose to $324,122, an increase of 8.2 per cent compared to 2013, while the average price of a townhouse condo rose to $362,571, an increase of 6.1 per cent annually.180

Residential sales in the towns surrounding Calgary rose 24 per cent on an annual basis to 5,513 units in 2014. The average price of a resale home outside the city increased 7.4 per cent to $396,812.181

Looking ahead, existing home sales in Calgary are forecast to decline by 4.0 per cent in 2015 due to lower employment growth and net migration levels, market uncertainty and a better supplied rental market. Prices are projected to rise by a modest 1.6 per cent annually over the same time period.182

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178 Calgary Real Estate Board, Calgary Regional Housing Market Statistics, December, 2014, p.1.179 Calgary Real Estate Board, 2015 Economic Outlook & Regional Market Forecast, p.15.180 Calgary Real Estate Board, Calgary Regional Housing Market Statistics, December, 2014, p.3.181 Ibid.182 Canada Mortgage and Housing Corporation, Housing Market Outlook, Calgary CMA, Fall 2014, p.16.

“The economic climate in 2015 will change substantially compared to 2014. As a result, the resale housing market will demonstrate different traits. Weaker economic conditions are expected to cause a pullback in sales, causing supply levels to rise from current low levels. Yet prices are expected to remain relatively stable, increasing by 1.58 per cent on an annual basis due to relatively low inventories going into this cycle.” 183

RENTAL MARKETCalgary’s apartment vacancy rate increased to 1.4 per cent in October 2014, from 1.0 per cent the previous year, mainly as a result of an increase in the supply of rental units. Calgary had the second lowest vacancy rate among the major CMAs in Canada in October 2014 behind Vancouver at 1.0 per cent.

“This represents the first increase in apartment vacancies in the Calgary CMA after declining for four consecutive years. Strong in-flows of migration to the region in recent years have placed upward pressure on rental demand, which has kept the vacancy rate below two per cent since October 2012. Employment growth continues to draw migrants to Calgary from other parts of the country, as well as from international sources. Contributing to the rise in vacancies, however, was an increase in the stock of rental units in the primary and secondary rental markets to meet demand.”184

Private Apartment Vacancy Rates in Select CMAs and CanadaOctober 2013 and 2014


0.0%$ 2.0%$ 4.0%$ 6.0%$ 8.0%$ 10.0%$ 12.0%$

St.$John$St.$John's$Halifax$

Saskatoon$Montreal$Quebec$Regina$Canada$OEawa$

Winnipeg$Edmonton$Toronto$Victoria$Calgary$$

Vancouver$

Vacancy&Rate&

2013$

2014$



183 I Canada Mortgage and Housing Corporation, Housing Market Outlook, Calgary CMA, Fall 2014, p.16.184 Canada Mortgage and Housing Corporation, Rental Market Report Calgary CMA, Fall 2014, p.2.

The average rental price for a two-bedroom apartment unit in the Calgary CMA rose 8.0 per cent to $1,322 per month in October 2014, from $1,224 per month in October 2013. Among the 15 major CMAs in Canada, Calgary had the highest average rent for a two-bedroom apartment, ahead of Vancouver ($1,311), Toronto ($1,251) and Edmonton ($1,227).

According to the Calgary Chamber of Commerce, the city’s tight rental market has become a barrier to attracting and retaining labour for many Calgary organizations.

“For people earning in that $25,000 to $40,000 income bracket, these are rents that are just out of reach,” said Calgary Chamber president Adam Legge. “It makes it increasingly difficult for people in those occupations of lower wage to stay in Calgary or to attract someone to Calgary with those kinds of incomes.”185

Calgary’s apartment vacancy rate is forecast to increase slightly in 2015 but rents are expected to continue to rise. The Canada Mortgage and Housing Corporation projects Calgary’s apartment vacancy rate to increase to 2.0 per cent in 2015, with the average rent for a two-bedroom apartment rising to $1,350 per month.186

“Despite the increase from 2013, the vacancy rate remained low by historical standards, resulting in continued upward pressure on rents.”187

Private Apartment Average Rents (Two-Bedroom) in Select CMAs and CanadaOctober 2013 and 2014


!$714!!

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!$.!!!! !$200!! !$400!! !$600!! !$800!!!$1,000!!!$1,200!!!$1,400!!

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Winnipeg!Regina!

Saskatoon!Victoria!ONawa!

Edmonton!Toronto!

Vancouver!Calgary!!

2013!

2014!



185 Metro, Calgary’s rents soar to highest in Canada as secondary-suite advocates lament lack of reform, Robson Fletcher, December 16, 2014.186 Canada Mortgage and Housing Corporation, Housing Market Outlook - Canada Edition, First Quarter 2015, p.18.187 CBC News, Calgary has highest rent out of major Canadian cities, finds report, December 16, 2014.

BUILDING PERMITSCalgary builders were issued a total of $2.13 billion in building permits during the third quarter of 2014, up 3.9 per cent from the previous quarter and up 7.0 per cent year-over-year.188 The value of residential permits issued in the third quarter of 2014 increased 17 per cent year-over-year to $1.3 billion while the value of non-residential permits declined 5.6 per cent to $832 million over the same period.

Value of Residential and Non-Residential Building PermitsCalgary CMA, Q1 2010 - Q3 2014


Across the province, the estimated value of building permit applications was $4.95 billion in the third quarter of 2014, up 8.3 per cent from the previous quarter and up 9.8 per cent year-over-year. The value of residential permits in Alberta increased 12.3 per cent year-over-year to $2.91 billion, while the value of non-residential permits rose 6.4 per cent to $2.04 billion.

“It’s no surprise that the value of permits in Alberta continues to climb, especially in the residential sector. Alberta’s home builders are taking advantage of this province’s steady population increases which are being propelled by the arrival of more provincial migrants.”189

NON-RESIDENTIAL BUILDING CONSTRUCTIONInvestment in non-residential building construction in the Calgary CMA, which includes commercial buildings, industrial developments, and institutional and government construction, totaled $1.05 billion in the final quarter of 2014, up 1.9 per cent compared to the previous quarter and up 10.5 per cent year-over-year. Nationally, non-residential building investment was virtually unchanged year-over-year (-0.2 per cent).190

Of the larger CMAs in Canada, Calgary’s growth in non-residential investment over the past year was only outpaced only by Edmonton (+17.2 per cent). Non-residential building construction investment

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188 Statistics Canada, CANSIM Table 026-0006.189 ATB Financial, The Owl, Alberta's building permits continue to impress, October 8, 2014.190 Statistics Canada, CANSIM Table 026-0016.

declined by 6.4 per cent in Montreal, by 3.4 per cent in Ottawa-Gatineau and by 2.7 per cent in Vancouver on an annual basis in the fourth quarter of 2014.

Investment in Non-Residential Building Construction (Q4 2013 and Q4 2014)Selected Census Metropolitan Areas (CMAs)


Investment in commercial construction projects makes up over 80 per cent of non-residential construction spending in Calgary and 70 per cent in Alberta. Investment in Calgary’s commercial sector was up a modest 1.0 per cent quarterly in the fourth quarter of 2014 (+9.1 per cent annually), and was unchanged in Alberta (+6.7 per cent annually). While a slowdown in construction spending in the province is forecasted for 2015, it is not expected to be as severe as what was experienced in 2009.

“Spending on commercial construction projects—things like office towers and retail outlets—makes up the majority of non-residential construction spending [in Alberta]. This was essentially unchanged in the fourth quarter, peaking at almost the same level it reached back in 2008. Back then the province was riding high on a wave of strong energy prices and developer enthusiasm, but [...] commercial construction slowed dramatically in 2009. Could the province be in for a similar drop in 2015? Certainly a slowdown in overall construction spending is expected, but it may not be quite as bad this time around. For one thing, the magnitude and speed of the oil price slide in 2009 was more severe than the current price rollercoaster. And secondly, 2009 was marked by a collapse in the global credit market and a severe world-wide recession. That’s not happening this time around. So while developers will rein in spending and delay some projects, the slowdown in 2015 may not be quite as dramatic.”191

CMA Q4 2013 Q4 2014 % ChangeToronto $2,354 $2,488 5.7%Montreal $1,577 $1,476 -6.4%Calgary $951 $1,051 10.5%Vancouver $840 $817 -2.7%Edmonton $615 $721 17.2%Ottawa $584 $564 -3.4%

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191 ATB Financial, The Owl, Non-residential construction steady at end of 2014, January 16, 2015.

OFFICE MARKETCalgary’s overall office vacancy rate continued to rise in the third quarter of 2014, increasing to 8.6 per cent from 8.3 per cent the previous quarter and from 6.6 per cent in the third quarter of 2013. Head lease vacancy was virtually unchanged quarter-over-quarter. Sublease vacancy, which is office space that tenants have decided to return to the market before the end of the lease term, rose to 3.0 per cent from 2.7 per cent in the previous quarter. Sublease space represented over one-third of total vacant office space in Calgary in the third quarter of 2014.

“The increase in available sublet space can be attributed to a number of mergers and acquisitions, as well as cost-recovery on unused space as companies re-evaluate their growth strategies in the current economic environment. Several long-term tenants took on more space than required in anticipation of future growth. With growth being delayed for a lot of companies, we are seeing more space being marketed as sublease space with various terms offered.”192

Vacancy in the downtown office market was unchanged quarter-over-quarter at 6.2 per cent, but was up from 5.0 per cent a year earlier. Vacancy in the beltline (11.7 per cent) and suburban north (12.2 per cent) and south markets (11.4 per cent) also rose on an annual basis.

Calgary Office Market Vacancy Rates (Q3 2013 and Q3 2014)

Source: Avison Young, The Office Report, Calgary Market, Q3 2013 and 2014.

Calgary’s rapidly changing office market is making it difficult for forecasters.

“The Calgary office market witnessed a number of changes in the third quarter of 2014, most of which continued a negative trend from the beginning of the year. Apprehension surrounding the devaluation of the stock market, the dropping price of oil and uncertainty over pipelines has resulted in a more conservative approach being taken by users of space. Optimistically, we believe the market will be flat for

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Vacancy&Ra

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Q3$2013$ Q3$2014$



192 Avison Young, The Office Report, Calgary Market, Q3 2014,p.1.

the next six to twelve months, but there are signs the market could be in for more volatility.” 193

“Calgary changes so much quicker (than other centres) … When you consider larger markets around Canada and North America, it’s really amazing the volatility that we see here and it’s just so hard to predict.”194

Cresa forecasts that Calgary’s downtown office vacancy rate will rise above 11 per cent by the end of 2015, with the addition of City Centre and the assumption that there will be 500,000 square feet of negative absorption. New office developments in the downtown area are expected to keep long-term vacancy rates elevated.

“Looking into 2016 and beyond, it’s hard to argue that vacancy won’t stay at or above 11% due to the addition of four more developments — Eau Claire Place (2016), 707 Fifth Street (2017), Brookfield Place - East (2018) and Telus Sky (2018). All told, these developments will add just over three million square feet to inventory and are approximately 65% leased, but the anchor tenants of these buildings have leased space inclusive of growth plans. If these growth projections don’t materialize, we could see subleases spin out of these towers in addition to the premises they are leaving behind.”195

Downtown Calgary New Inventory and Vacancy Projection (all classes)

Source: Cresa, Point of View, Fourth Quarter 2014 Downtown and Beltline Office Market Report.



193 Avison Young, The Office Report, Calgary Market, Q3 2014,p.1.194 Calgary Herald, Calgary downtown office market demand "muted", Mario Toneguzzi, January 30, 2015.195 Cresa, Point of View, Fourth Quarter 2014 Downtown and Beltline Office Market Report, p.1.

POPULATIONCalgary’s population reached 1.195 million in 2014, an increase of 38,500 people year-over-year. This was a record for any 12-month period in the city’s history, representing a 3.3 per cent annual increase.196

“Inter-provincial migrants were attracted to Alberta and Calgary by a robust provincial job market and pushed by the lack of job opportunities in the rest of Canada. For example, the Calgary Economic Region (CER) has garnered more than 10 per cent of Canada’s job growth since December 2013. This is remarkable when one considers that the CER only has about four per cent of the nation’s population.”197

Calgary’s population is forecast to increase by 120,500 over the next four years, reaching a total of 1.316 million by April 2018. Over this period, net migration is expected to account for 59 per cent of the population growth (71,000) while natural increase is forecast to account for the remaining 41 per cent (49,500).

As a result of population aging and a slowdown in net migration, the age distribution of Calgary’s population is expected to shift over the next four years. The 30 - 34 cohort (+19,000) and 35 - 39 cohort (+20,000) are projected to experience the largest increases, while the population of the 20 - 24 cohort is expected to decline (-4,000) over the four years to 2018. According to the latest City of Calgary forecast, “this would have an adverse effect on net migration levels as this demographic group tends to migrate at higher rates than other age cohorts.” 198



196 City of Calgary, 2014,Civic Census sResults.197 City of Calgary Economics, Calgary & Region Economic Outlook 2014 - 2019, Fall 2014, p.11.198 Ibid.

Trends in the Labour MarketThis section examines labour market information for the Calgary Region, Alberta, and Canada.

Calgary Census Metropolitan Area (CMA)Calgary finished the year off with another solid increase in jobs in the last quarter of 2014, despite rapidly declining oil prices. Employment in the Calgary CMA rose by 7,700 on a quarterly basis, following a healthy gain of 6,800 jobs the previous quarter. However, should the energy market uncertainty continue and oil prices remain depressed for an extended period of time, the pace of hiring is expected to decelerate into 2015.

Labour Force Statistics - Calgary CMA

Calgary CMA Oct-14 Nov-14 Dec-14

Population 1,150,600 1,152,800 1,154,800Labour Force 838,800 842,100 848,500

Employed 800,700 805,400 808,000Unemployed 38,200 36,700 40,500

Participation Rate 72.9% 73.0% 73.5%Employment Rate 69.6% 69.9% 70.0%Unemployment Rate 4.6% 4.4% 4.8%

Source: Statistics Canada, CANSIM Table 2820116, Labour Force Survey, 3-month moving average, seasonally adjusted

Q4 2014 Q3 2014Quarterly Change Q4 2013

Annual Change

1,152,700 1,144,300 8,400 1,111,100 41,600843,100 840,100 3,000 825,900 17,200804,700 797,000 7,700 787,900 16,80038,500 43,100 -4,600 38,100 40073.1% 73.4% -0.3% 74.3% -1.2%69.8% 69.6% 0.2% 70.9% -1.1%4.6% 5.1% -0.6% 4.6% 0.0%

Source: Statistics Canada, CANSIM Table 2820116, Labour Force Survey, 3-month moving average, seasonally adjusted

On an annual basis, employment in the Calgary CMA increased by 16,800 or 2.1 per cent in the fourth quarter of 2014. The most significant year-over-year employment gains were in transportation and warehousing (+12,100), educational services (+10,300), trade (+8,000), manufacturing (+5,600) and business, building and other support services (+5,400). These increases were offset by notable losses in accommodation and food services(-8,500), other services (-6,200), utilities (-4,300), information, culture and recreation (-3,900) and construction (-3,400). Employment changed very little year-over-year in health care and social assistance and forestry, fishing, mining and oil and gas.199

Fourth quarter 2014 job gains resulted in Calgary’s unemployment rate dropping to 4.6 per cent, from 5.1 per cent the previous quarter.

!8,500&!6,200&

!4,300&!3,900&!3,400&

!1,300&!600&

900&2,400&2,900&

5,400&5,600&

8,000&10,300&

12,100&

!15,000& !5,000& 5,000& 15,000&

Accommoda3on&&&food&services&Other&services&

U3li3es&Informa3on,&culture&&&recrea3on&

Construc3on&Prof.,&scien3fic&&&tech.&services&

Forestry,&fishing,&mining,&oil&&&gas&Health&care&&&social&assistance&

Fin.,&insurance,&real&est.&&&leasing&Public&administra3on&

Bus.,&bldg.&&&other&support&services&Manufacturing&

Trade&Educa3onal&services&

Transporta3on&&&warehousing&

Annual&Change&in&Employment&by&Industry&Calgary&CMA&8&Q4&2014&



199 Statistics Canada, Labour Force Survey CANSIM Table 282-0011, unadjusted (3 month moving average)

Calgary’s labour force participation rate200 declined to 73.1 per cent in the final quarter of 2014, from 73.4 per cent the previous quarter. In October 2014, the Calgary CMA’s participation rate dropped below 73 per cent to 72.9 per cent, a rate not seen in approximately 17 years (since August 1997). According to the City of Calgary, Corporate Economics department, “uncertainty about the pace of growth of local economic activity, associated with the recent plunge in oil prices, may have started to creep into labour market entry and exit decisions.”201 On the upside, Calgary’s participation rate rebounded to 73.5 per cent in December 2014, and the size of the labour force in the fourth quarter of 2014 was 843,100, up 2.1 per cent from one year ago.

While an annual labour force increase of 17,200 in the fourth quarter of 2014 was positive, Calgary’s working age population increased by a much higher 41,600 year-over-year in the fourth quarter of 2014. This result implies that only 40 per cent of the new working age population to Calgary entered the labour force. This is down significantly from the fourth quarter of 2013, when over three quarters of the new working age population (77 per cent) entered the labour force.

Following estimated employment growth of 2.6 per cent in 2014,202 employment in the Calgary CMA is forecast to grow by a more modest 0.9 per cent in 2015.203

“Job losses are expected in the primary and utilities sector, which includes the mining, quarry and oil and gas extraction (highest earnings sector). Meanwhile, the personal and non-commercial services industries are expected to see the largest growths in employment. Population gains in the Calgary CMA will generate new job opportunities in areas such as accommodation, food services, recreation, education and health services. However, some of these positions represent the lower ranges of the provincial weekly earnings.”204

AlbertaThe fourth quarter of 2014 marked the 18th consecutive quarter of positive job growth in Alberta, “an uninterrupted expansion that is unique to the rest of the country.”205 Employment in the province increased by 17,000 on a quarterly basis and by 58,300 compared to the fourth quarter of 2013, representing just over one-third of the net new jobs created nationally.

“Alberta was the strong spot in December—that’s right, the strong spot. The province created 5,700 new jobs in the month (including a net increase in the resource sector), though the unemployment rate did rise 2 ticks to 4.7%. The province led the country with 2.9% job growth in 2014 (Dec-to-Dec), but that is likely to change in the coming months as the steep slide in oil triggers a wave a cost cutting across the energy sector.”206



200 Total labour force expressed as a percentage of the population aged 15 years and over that is either employed or actively looking for employment.201 The City of Calgary, Corporate Economics, December 2014 Labour Market Review, January 19, 2015, p.1.202 Statistics Canada, CANSIM table 282-0129.203 Calgary Real Estate Board, 2015 Economic Outlook & Regional Market Forecast. p.10. Forecast source: Statistics Canada and the Conference Board of Canada.204 Ibid.205 Employment and Social Development Canada, Labour Market Bulletin - Alberta: October 2014 (Quarterly Edition.206 BMO Capital Markets, Regional Labour Market Report Card, January 9, 2015.

Labour Force Statistics - Alberta

Alberta Oct-14 Nov-14 Dec-14Population 3,308,000 3,312,500 3,317,400Labour Force 2,400,700 2,404,600 2,416,700

Employed 2,293,700 2,296,900 2,302,600Unemployed 107,000 107,600 114,000

Participation Rate 72.6% 72.6% 72.8%Employment Rate 69.3% 69.3% 69.4%Unemployment Rate 4.5% 4.5% 4.7%Source: Statistics Canada, CANSIM Table 2820087, Labour Force Survey, seasonally adjusted


Annual Change

3,312,600 3,296,200 16,400 3,215,200 97,4002,407,300 2,392,500 14,800 2,349,400 57,9002,297,700 2,280,700 17,000 2,239,400 58,300

109,500 111,700 -2,200 110,000 -50072.7% 72.6% 0.1% 73.1% -0.4%69.4% 69.2% 0.2% 69.7% -0.3%4.5% 4.7% -0.2% 4.7% -0.2%

Source: Statistics Canada, CANSIM Table 2820087, Labour Force Survey, seasonally adjusted

Alberta employers added more full-time workers than part-time workers on a year-over-year basis in the fourth quarter of 2014. That being said, part-time employment grew at a faster pace than full-time employment, by 3.1 per cent compared to 2.5 per cent for full-time employment.

Men accounted for over 90 per cent of the new jobs in the province in the fourth quarter of 2014. On an annual basis, employment for men increased by 52,800 or 4.3 per cent while employment for women was up a modest 5,500 or 0.5 per cent.

All of the major age categories in Alberta experienced employment growth on a year-over-year basis in the final quarter of the year. While job gains were concentrated in the 25 - 54 years age category, which increased by 45,300 or 3.0 per cent annually, employment among youth aged 15 - 24 years managed a respectable 2.9 per cent increase over the same time period. Employment among workers aged 55 years and older increased by 3,900 or 1.0 per cent annually in the final quarter of the year.

Alberta’s services-producing sector added 49,700 net jobs on an annual basis in the fourth quarter of 2014, led by gains in transportation and warehousing (+16,200), educational services (+12,300), professional, scientific and technical services (+9,100) and health care and social assistance (+8,800). The goods-producing sector also managed a modest employment gain in the final quarter, despite a decline of 15,700 jobs in the forestry, fishing, mining and oil and gas industry. Thanks to solid annual increases in manufacturing (+13,000) and construction (+10,700), overall employment in the goods-producing sector was up by 8,900 in the fourth quarter of 2014.

3,900!

45,300!

9,100!

5,500!

52,800!

11,600!

46,800!

0! 10,000! 20,000! 30,000! 40,000! 50,000! 60,000!

55 years +!

25 - 54 years!

15 - 24 years!

Women!

Men!

Part-time!

Full-time!

Annual Change in Employment by Type of Work, Gender and Age!Alberta - Q4 2014!!

!15,700'!5,800'!4,800'

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Manufacturing'TransportaCon'&'warehousing'

Annual&Change&in&Employment&by&Industry&Alberta&7&Q4&2014&



Following estimated employment growth of 2.2 per cent in 2014,207 employment in Alberta is forecast to increase by an average of just 0.3 per cent in 2015.208

“Indirectly, the effect [of the slide in oil prices in Alberta] will spread to employment, net migration, the housing sector, consumer spending and, possibly, public sector spending. Our updated forecasts assume a decline in employment during the first half of 2015 in Alberta. Job losses could be as much as half the jobs created in 2014. Our forecasts also assume some partial reversal during the second half of this year amid rising oil prices and rebuilding confidence.”209

UNEMPLOYMENTOn average, there were 109,500 unemployed people in Alberta in the fourth quarter of 2014, down from 111,700 unemployed the previous quarter and from 110,000 in the fourth quarter of 2013. Alberta’s unemployment rate averaged 4.5 per cent, down from 4.7 per cent the previous quarter and 4.7 per cent in the final quarter of 2013.

The average duration of unemployment in Alberta held steady at 12.8 weeks in the fourth quarter of 2014. In contrast, at the national level, the average length of unemployment jumped from 17.9 weeks in the third quarter of 2014 to 18.6 weeks in the final quarter of the year. Saskatchewan had the lowest average duration of unemployment in the fourth quarter of 2014 at 12.0 weeks, followed by Alberta (12.8 weeks) and Newfoundland and Labrador (13.2 weeks). The remaining provinces had an average duration of unemployment of 14 weeks or longer, with Ontario recording the highest figure at 20.7 weeks.210

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207 Statistics Canada, CANSIM table 282-0002.208RBC Economics, Provincial Outlook Update, February 6, 2015; TD Economics, Canadian Provincial Economic Forecast Update, January 26, 2015; BMO Economics, Provincial Economic Outlook, February 27, 2015; CIBC Economics, Provincial Outlook 2015, February 17, 2015; Scotia Economics, Global Forecast Update, February 26, 2015. 209 RBC Economics, Provincial Outlook Update, February 6, 2015, p.2.210 Statistics Canada, CANSIM table 282-0047.

The number of long term unemployed persons in Alberta (those jobless for 27 weeks or more) declined sharply to 10,600 in December 2014, from 15,400 in December 2013, accounting for 10 per cent of the total unemployed in the province. Nationally, the number of people without work for the same length of time (228,700) made up 19 per cent of the total unemployed. 211

CanadaCanadian employment increased by 80,200 on a quarterly basis in the final quarter of the year, following a gain of 61,400 jobs in the third quarter of 2014. On a year-over-year basis, employment in Canada rose by 171,100 or 1.0 per cent in the fourth quarter of 2014.

Labour Force Survey Statistics - Canada

Canada Oct-14 Nov-14 Dec-14Population 29,148,000 29,165,900 29,190,000Labour Force 19,227,300 19,236,600 19,225,400

Employed 17,968,600 17,957,900 17,953,600Unemployed 1,258,800 1,278,600 1,271,800

Participation Rate 66.0% 66.0% 65.9%Employment Rate 61.6% 61.6% 61.5%Unemployment Rate 6.5% 6.6% 6.6%



Annual Change

29,168,000 29,098,400 69,600 28,817,300 350,70019,229,800 19,210,700 19,100 19,135,900 93,90017,960,000 17,879,800 80,200 17,788,900 171,1001,269,700 1,330,900 -61,200 1,347,000 -77,300

65.9% 66.0% -0.1% 66.4% -0.5%61.6% 61.4% 0.2% 61.7% -0.1%6.6% 6.9% -0.3% 7.0% -0.4%


Consistent with Alberta, the bulk of new jobs nationally were full-time, which increased by 117,200 or 0.8 per cent annually in the final quarter of 2014. However, part-time employment in Canada grew at double the pace (1.6 per cent) of full-time employment.

Men accounted for over two-thirds of the new jobs in the country in the fourth quarter of 2014. On an annual basis, employment for men increased by 117,400 or 1.3 per cent while employment for women rose by 53,700 or 0.6 per cent.

Job creation was fairly evenly split between the major age categories in the final quarter of the year. However, employment among youth aged 15 - 24 years grew at a much faster year-over-year pace (2.2 per cent) than for those aged 55 years+ (1.8 per cent) and adults aged 25 - 54 years (0.5 per cent).

On an annual basis, employment growth was concentrated in the services-producing sector in the fourth quarter of 2014 (+130,100). However goods-producing industries also recorded an increase of 41,400 over the same period. Notable gains in the services-producing sector were recorded in health care and social assistance (+47,500) and accommodation and food services (+41,800). Three

62,100 !

56,300 !

52,700 !

53,700 !

117,400 !

54,000 !

117,200 !

- ! 20,000 ! 40,000 ! 60,000 ! 80,000 ! 100,000 ! 120,000 !

55 years +!

25 - 54 years!

15 - 24 years!

Women!

Men!

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Full-time!

Annual Change in Employment by Type of Work, Gender and Age!Canada - Q4 2014 !



211 Statistics Canada, CANSIM Table 282-0047, Labour force survey estimates (LFS), duration of unemployment by sex and age group, unadjusted for seasonality, monthly.

industries in the services sector posted annual employment losses, with the largest decline recorded in information, culture and recreation (-20,700). Employment in the other services industry and the professional, scientific and technical service industry declined by 19,600 and 8,500 respectively.

Canada’s construction employers led hiring in the goods sector in the fourth quarter of 2014, with a gain of 42,500 jobs year-over-year. Employment in manufacturing also increased by 10,900 over the same period. The forestry, fishing, mining and oil and gas (-9,700) and utilities industries (-3,200) posted modest job losses, while employment in Canada’s agriculture industry was relatively flat year-over-year.

According to Manpower’s Canadian Employment Outlook, of the more than 1,900 employers surveyed, a net 4.0 per cent expect to be hiring over the first quarter of 2015. This figure represents approximately 11 per cent of Canadian employers expecting to increase staffing levels, 7 per cent anticipating a decrease and 79 per cent expecting no change. Adjusted for seasonality, Canada’s net employment outlook was +10 per cent, up 2.0 percentage points from the previous quarter but down 1.0 percentage point year-over-year.

“We are seeing some cautious, though positive, signs in the labour market in Canada, with employers expecting a fair hiring pace for the coming quarter,” said Michelle Dunnill, Manpower Area Manager for Toronto, Mississauga and Markham. “The nation’s unemployment rate dropped to its lowest level in nearly six years this fall. However, we must be cautious and remember that a number of citizens are discouraged and have abandoned finding fulltime work, and are getting by on parttime work and shortterm contracts.”212

TD Economics expects low oil prices and government restraint to temper hiring in the resource and public sectors in 2015.

“Hiring has averaged 22K jobs per month over the past six months, a significant improvement after being relatively flat over the first half of 2014. Looking ahead, some of this positive momentum is expected to spill over into 2015. However, there are some notable headwinds that will keep job creation in check next year. The recent plunge in oil prices will likely lead to continued softness in resource hiring, which is down 1.4% in December on a year-over-year basis. Ongoing government restraint, particularly at the provincial level, is expected to constrain employment in the public sector. What's more, Canada's 2015 growth prospects are tightly linked to its export sector which is less labour intensive than other areas of the economy. This suggests that this export-led growth path will not translate into a surge in employment.”213

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!9,700&!8,500&

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10,900&12,400&14,100&16,600&18,400&

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Annual&Change&in&Employment&by&Industry&Canada7&Q4&2014&



212 Manpower Group, Q1 2015 Manpower Employment Outlook Survey Canada, p.1.213 TD Economics, Data Release: Canadian employment edges down in December, January 9, 2015.

UNEMPLOYMENTCanada’s unemployment rate declined to a relatively low 6.6 per cent in the final quarter of 2014, down from 6.9 per cent the previous quarter and from 7.0 per cent in the fourth quarter of 2013. In 2014, Canada’s unemployment rate averaged 6.9 per cent. Forecasts for 2015 are in the range of 6.4 per cent to 6.8 per cent.214

“...though we aren’t that far from full employment at a 6.6% unemployment rate now [Dec 2014], cutbacks due to lower crude revenues and slower economic growth through the first half of the year [2015] will mean that we aren’t likely to go any lower on that measure anytime soon.”215

Across Canada, Saskatchewan had the lowest unemployment rate among provinces in the fourth quarter of 2014 at 3.5 per cent, followed by Alberta (4.6 per cent) and Manitoba (5.1 per cent). Newfoundland and Labrador had the highest unemployment rate in Canada at 11.3 per cent in the final quarter of 2014, down from 11.7 per cent in 2013.

TD Economics is projecting Saskatchewan, Alberta and Manitoba to post the lowest unemployment rates in Canada in 2015. Saskatchewan’s unemployment rate is forecast to average 4.5 per cent in 2015, while Alberta’s and Manitoba’s unemployment rate is projected to average 5.3 per cent. Newfoundland and Labrador and Prince Edward Island are forecast to have the highest unemployment rates in Canada in 2015 at 12.4 per cent and 10.7 per cent respectively.216

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6.4%%

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7.0%%

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Unemployment*Rate*Forecast*Canada*3*2015*

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214 RBC Economics, Provincial Outlook Update, February 6, 2015; TD Economics, Canadian Provincial Economic Forecast Update, January 26, 2015; BMO Economics, Provincial Economic Outlook, February 27, 2015; CIBC Economics, Provincial Outlook 2015, February 17, 2015; Scotia Economics, Global Forecast Update, February 26, 2015.215 CIBC Economics, Economic Flash! Canadian Jobs: Ending 2014 With a Shrug, January 9, 2015, p.2.216 TD Economics, Canadian Provincial Economic Forecast Update, January 26, 2015, p.3.

JOB VACANCIESCanadian employers had an estimated 247,000 job vacancies in November 2014. With approximately 1.178 million unemployed in the same month, Canada had 4.8 unemployed people for every job vacancy, down from 5.6 in November 2013.217

The lowest ratios of unemployed to job vacancies in November 2014 were in Saskatchewan, Alberta, Manitoba and British Columbia. A low ratio means there is low unemployment and/or many job openings.

With 9,900 vacancies and 17,600 unemployed in November 2014, Saskatchewan’s ratio was 1.8, down from 2.3 the previous year. Alberta’s ratio was 2.0 unemployed for every job vacancy in November 2014, reflecting 49,700 job vacancies and 97,500 unemployed people. In November 2014, British Columbia, Manitoba, Alberta and Saskatchewan accounted for 41 per cent of job vacancies in Canada and just 25 per cent of all unemployed. Newfoundland and Labrador had the highest ratio at 13.2 unemployed for every job vacancy.

13.2%

8.7% 8.5%7.3% 6.4% 5.7% 4.8% 4.3% 3.7%

2.0% 1.8%

0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%20.0%

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NB%

PE%

NS%

QC%

ON%

Canada%

BC%

MN%

AB%

SK%

Ra#o

%

Unemployment.to.Job%Vacancies%Ra#o,%Canada%and%Provinces,%three%month%average%Nov.%2013%and%2014%

Nov=13% Nov=14%



217 Statistics Canada, CANSIM table 284-0003.

Calgary & Area Employer SurveyThe purpose of the quarterly survey is to gather information from Calgary and area employers on their recruitment and retention practices and various other employment issues they are facing. Over the course of the year, employers will be divided into four categories based on the number of employees in the company and results of the survey will be reported on as follows:

Q1 2014: Large-sized companies with 100+ employees

Q2 2014: Medium-sized companies with 50 – 99 employees

Q3 2014: Small-sized companies with 10 – 49 employees

Q4 2014: Micro-sized companies with <10 employees

Q4 2014 Survey Results: Micro-Sized Companies (<10 Employees)In the fourth quarter of 2014, a survey was conducted of 200 Calgary and area micro-sized companies. For additional information on survey methodology, see Appendix A.

PROFILE OF COMPANIESThe 200 companies surveyed employ approximately 1,014 people. Of this total, 75 per cent are full-time employees, 15 per cent are part-time employees, and 10 per cent are ‘other’ employees (contract, seasonal, casual, temporary, relief, not specified).

Number of Employees and Companies Surveyed in Q4 2014

Note: “Other” represents companies from the remainder of the industry categories: Agriculture, Utilities, Information and Culture, Management of Companies, Administrative and Support Services, Educational Services, Other Services, and Public

Administration.

Industry Total Employees

Number of Companies

Mining & Oil & Gas 97 20Construction 121 20Manufacturing 104 20Wholesale & Retail Trade 100 20Transportation & Warehousing 96 20Professional, Scientific & Technical Services 93 20Health Care & Social Assistance 98 20Accommodation & Food Services/Arts & Entertainment 93 20Finance, Insurance, Real Estate & Leasing 124 20Other 88 20Total 1,014 200



BUSINESS ACTIVITYOn balance, 7 per cent of the employers said their company expanded in the year prior to their survey, up from 2 per cent in 2013.

Employers were asked questions about their past and future business activity. Specifically, they were asked if their company expanded or downsized in the 12 months prior to their survey, and if they anticipated a business expansion or downsize in the 12 months following their survey.

Sixteen per cent of the employers surveyed in Q4 2014 said their company expanded in the 12 months prior to their survey and 9 per cent reported their company downsized, resulting in a positive balance218 of 7 per cent. In Q4 2013, 10 per cent of the companies expanded and 8 per cent downsized, for a positive balance of 2 per cent.

In Q4 2014, 25 per cent of the employers in the finance, insurance, real estate and leasing industry reported their company expanded in the prior year, up significantly from the 2013 results when 5 per cent of the employers on balance said their company downsized. In contrast, 10 per cent of the health care and social assistance and accommodation and food services/arts and entertainment employers on balance downsized in the previous 12 months. Past Business ActivityPercentage of companies that expanded or downsized in the 12 months prior to their survey

Expanded Downsized Balance Expanded Downsized BalanceOverall Results 10% 8% 2% 16% 9% 7%

Results by IndustryMining & Oil & Gas 5% 10% -5% 5% 5% 0%Construction 10% 15% -5% 15% 5% 10%Manufacturing 15% 5% 10% 10% 5% 5%Wholesale & Retail Trade 10% 10% 0% 15% 5% 10%Transportation & Warehousing 15% 0% 15% 20% 5% 15%Professional, Scientific & Technical Services 10% 25% -15% 20% 10% 10%Health Care & Social Assistance 15% 5% 10% 5% 15% -10%Accommodation & Food Services/Arts & Entertainment 5% 5% 0% 10% 20% -10%Finance, Insurance, Real Estate & Leasing 0% 5% -5% 35% 10% 25%Other 15% 0% 15% 25% 5% 20%

Q4 2013 Q4 2014

2%#7%#

%10%#%5%#0%#5%#10%#15%#20%#

Q4#2013# Q4#2014#

Past%Business%Ac-vity%Has#your#company#expanded#or#downsized#

in#the#last#12#months?#Expanded# Downsized# Balance#



218 Percentage of companies reporting an expansion minus percentage of companies reporting a downsize.

On balance, 21 per cent of the employers anticipate a business expansion in the next 12 months.

Twenty-four per cent of the employers surveyed in Q4 2014 anticipate their company will expand in the 12 months following their survey and 3 per cent anticipate their company will downsize, for a positive balance219 of 21 per cent. These results are unchanged from the 2013 results.

In Q4 2014, 35 per cent of the employers in the transportation and warehousing industry anticipate a business expansion in the next 12 months, up slightly from the 2013 results. In contrast, only 10 per cent of the mining and oil and gas employers on balance anticipate a business expansion in the next year, unchanged from the results of the previous year.Future Business ActivityPercentage of companies that anticipate an expansion or downsize in the 12 months following their survey

Expansion Downsize Balance Expansion Downsize BalanceOverall Results 24% 3% 21% 24% 3% 21%

Results by IndustryMining & Oil & Gas 20% 10% 10% 15% 5% 10%Construction 40% 0% 40% 25% 5% 20%Manufacturing 15% 0% 15% 20% 0% 20%Wholesale & Retail Trade 10% 5% 5% 25% 0% 25%Transportation & Warehousing 30% 0% 30% 35% 0% 35%Professional, Scientific & Technical Services 35% 10% 25% 25% 10% 15%Health Care & Social Assistance 20% 5% 15% 15% 0% 15%Accommodation & Food Services/Arts & Entertainment 15% 0% 15% 20% 5% 15%Finance, Insurance, Real Estate & Leasing 30% 0% 30% 35% 5% 30%Other 20% 0% 20% 25% 0% 25%

Q4 2013 Q4 2014

Comments

“I may close the business or choose to operate by myself.” - Accommodation & Food Services/Arts & Entertainment

“The company is up for sale.” - Construction

“I'm a small company and I'm going out of business.” - Finance, Insurance, Real Estate & Leasing

“I will be retiring in the next 12 months. From there, it will be up to the board what they do.” - Finance, Insurance, Real Estate & Leasing

“We're currently in a holding pattern.” - Mining & Oil & Gas

“No, but I anticipate expanding in the next 24 months.” - Professional, Scientific & Technical Services

“I'm winding down the business.” - Professional, Scientific & Technical Services

“If I had more land, I could expand the number of storage units more quickly.” - Transportation & Warehousing

21%$ 21%$

%5%$0%$5%$10%$15%$20%$25%$30%$

Q4$2013$ Q4$2014$

Future&Business&Ac-vity&Do$you$an1cipate$a$business$expansion$or$

downsize$in$the$next$12$months?$Expansion$ Downsize$ Balance$



219 Percentage of companies anticipating a business expansion minus percentage of companies anticipating a business downsize.

“Our sales will continue to grow.” - Transportation & Warehousing

“For the past 10 or 11 years, we have been the same.” - Transportation & Warehousing

“That's a difficult question to answer. The owner is aging, so I'm not sure about the future of the business.” - Wholesale & Retail Trade

EMPLOYMENT: PAST LAYOFFS, VACANT POSITIONS, AND FUTURE EMPLOYMENTNine per cent of the employers reported they laid off employees in the previous three months, up from 6 per cent the previous year.

Nine per cent of the employers surveyed in Q4 2014 reported they laid off workers in the three months prior to their survey. Approximately 22 people were reported as being laid off. In Q4 2013, 6 per cent said their company had laid off about 19 workers in the three months prior to their survey. Fifteen per cent of the professional, scientific and technical services, health care and social assistance, accommodation and food services/arts and entertainment and finance, insurance, real estate and leasing employers surveyed in Q4 2014 reported they laid off workers, all higher than the 2013 results. In contrast, none of the construction and wholesale and retail trade employers reported they laid off employees.

One-fifth of the employers had vacant positions that needed to be filled.

Twenty-one per cent of the employers surveyed in Q4 2014 said they had vacant positions that needed to be filled at the time of their survey, down slightly from 25 per cent in 2013. Forty per cent of the employers in the construction industry and 30 per cent of the employers in the accommodation and food services/arts and entertainment industry had vacant positions, compared to only 5 per cent of the finance, insurance, real estate and leasing employers.

Past LayoffsPercentage of companies that laid off employees in the three months prior to their survey

Q4 2013 Q4 2014Overall Results 6% 9%

Results by IndustryMining & Oil & Gas 0% 5%Construction 5% 0%Manufacturing 10% 5%Wholesale & Retail Trade 15% 0%Transportation & Warehousing 5% 5%Professional, Scientific & Technical Services 10% 15%Health Care & Social Assistance 0% 15%Accommodation & Food Services/Arts & Entertainment 0% 15%Finance, Insurance, Real Estate & Leasing 5% 15%Other 5% 10%

Vacant PositionsPercentage of companies that had vacant positions that needed to be filled





Overall, employers reported they had 75 vacancies that needed to be filled, down slightly from 83 vacancies reported the previous year. Overall, this equates to a vacancy rate of 6.9 per cent for Q4 2014. Vacancy rates ranged from a low of 0.8 per cent in the finance, insurance, real estate and leasing industry to a high of 17.8 per cent in the ‘other’ industry category.

Job Vacancy Rates

Industry # of Vacant Positions

Mining & Oil & Gas 4Construction 21Manufacturing 9Wholesale & Retail Trade 3Transportation & Warehousing 12Professional, Scientific & Technical Services 7Health Care & Social Assistance 4Accommodation & Food Services/Arts & Entertainment 5Finance, Insurance, Real Estate & Leasing 12Other 6Total 83

Q4 2013Vacancy

Rate# of Vacant Positions

3.8% 816.4% 138.3% 53.2% 58.8% 88.9% 63.8% 25.0% 8

10.3% 15.2% 197.6% 75

Q4 2013 Q4 2014Vacancy

Rate7.6%9.7%4.6%4.8%7.7%6.1%2.0%7.9%0.8%

17.8%6.9%

Q4 2014

Mining & Oil & Gas – Vacant Positions

NOC Code Occupation Vacant Positions

7441 Commercial installers and servicers 61435 Collectors 12142 Metallurgical and materials engineers 1Total 8

Construction – Vacant Positions


7271 Carpenters 67611 Construction trades helpers and labourers 30711 Construction managers 27295 Floor covering installers 17521 Heavy equipment operators (except crane) 1Total 13

Manufacturing – Vacant Positions


3223 Dental technologists, technicians and laboratory bench workers 15241 Graphic designers and illustrators 17237 Welders and related machine operators 19535 Plastic products assemblers, finishers and inspectors 19619 Other labourers in processing, manufacturing and utilities 1Total 5



Wholesale & Retail Trade – Vacant Positions


6421 Retail salespersons 27441 Residential and commercial installers and servicers 17452 Material handlers 19617 Labourers in food, beverage and tobacco processing 1Total 5

Transportation & Warehousing – Vacant Positions


7511 Truck drivers 37452 Material handlers 27514 Delivery and courier service drivers 27301 Contractors and supervisors, mechanic trades 1Total 8

Professional, Scientific & Technical Services – Vacant Positions


1111 Financial auditors and accountants 21241 Administrative assistants 12152 Landscape architects 12251 Architectural technologists and technicians 17514 Delivery and courier service drivers 1Total 6

Health Care & Social Assistance – Vacant Positions


1243 Medical secretaries 16322 Cooks 1Total 2

Accommodation & Food Services/Arts & Entertainment & Recreation - Vacant Positions


0632 Accommodation service managers 15112 Conservators and curators 15113 Archivists 15212 Technical occupations related to museums and art galleries 16421 Retail salespersons 16513 Food and beverage servers 16525 Hotel front desk clerks 16731 Light duty cleaners 1Total 8



Finance, Insurance, Real Estate and Leasing - Vacant Positions


1314 Assessors, valuators and appraisers 1Total 1

Other – Vacant Positions


2171 Information systems analysts and consultants 108612 Landscaping and grounds maintenance labourers 64214 Early childhood educators and assistants 24161 Natural and applied science policy researchers, consultants and program officers 1Total 19

On balance, 11 per cent of the employers anticipate employment in their company will increase over the next three months.

Once any current vacant positions are filled, 15 per cent of the employers surveyed in Q4 2014 anticipate employment in their company will increase in the next three months, 4 per cent anticipate employment will decrease, and 81 per cent anticipate employment will stay the same, for a positive balance220 of 11 per cent. These results are similar to the 2013 results, when 10 per cent of the employers on balance anticipated employment would increase.

In Q4 2014, employers from the construction, ‘other’, and professional, scientific and technical services industries were the most positive about future employment levels. Twenty-five per cent of the construction and ‘other’ employers and 20 per cent of the professional, scientific and technical services employers anticipate an increase in employment in the three months following their survey. In contrast, 10 per cent of the accommodation and food services/arts and entertainment employers on balance anticipate employment will decrease in the next three months. Employers in the mining and oil and gas industry were neutral on balance, with 10 per cent anticipating an increase in employment over the next three months and 10 per cent anticipating a decrease.

10%$ 11%$

%5%$0%$5%$10%$15%$20%$

Q4$2013$ Q4$2014$

Future&Employment&Do$you$an1cipate$employment$will$increase,$$

decrease$or$stay$the$same$in$the$next$3$months?$

Increase$ Decrease$ Balance$



220 Percentage of companies that anticipate employment in their company will increase in the next three months minus the percentage of companies that anticipate employment will decrease.

Future EmploymentPercentage of companies that anticipated an increase or decrease in total employment in the 3 months following their survey

Increase Decrease Balance Increase Decrease BalanceOverall Results 13% 3% 10% 15% 4% 11%

Results by IndustryMining & Oil & Gas 5% 0% 5% 10% 10% 0%Construction 15% 5% 10% 25% 0% 25%Manufacturing 15% 5% 10% 10% 0% 10%Wholesale & Retail Trade 0% 5% -5% 15% 5% 10%Transportation & Warehousing 30% 0% 30% 15% 5% 10%Professional, Scientific & Technical Services 10% 10% 0% 20% 0% 20%Health Care & Social Assistance 20% 0% 20% 15% 0% 15%Accommodation & Food Services/Arts & Entertainment 20% 0% 20% 5% 15% -10%Finance, Insurance, Real Estate & Leasing 0% 0% 0% 5% 0% 5%Other 15% 0% 15% 25% 0% 25%

Q4 2013 Q4 2014

Comments

“We will decrease because it's our end of season right now.” - Accommodation & Food Services/Arts & Entertainment

“We will hire between one and five more people.” - Health Care & Social Assistance

“I'm not hiring in the next 12 months.” - Manufacturing

“It's my slow season in winter, so I expect to decrease by five.” - Mining & Oil & Gas

“We're in the middle of some downsizing and I don't know when it will happen. I expect we will stay the same for the next three months though.” - Mining & Oil & Gas

“Once the snow starts, we will hire two to four people depending on the demand.” - Other

“There's an expectation of some new work which would require hiring people to look after it. At least three more people will be needed.” - Transportation & Warehousing

“We will increase by as many qualified people as we can find.” - Transportation & Warehousing

“I anticipate an increase because we're getting busier all the time.” - Wholesale & Retail Trade

“We will decrease by two. We’re such a seasonal business.” - Wholesale & Retail Trade

TEMPORARY FOREIGN WORKERSSeven per cent of the employers employ temporary foreign workers, similar to the 2013 results.

Seven per cent of the employers surveyed in Q4 2014 reported they employ approximately 23 temporary foreign workers from Spain, the Philippines, India, New Zealand, the Czech Republic, China, South Africa, Chile, France, Australia and Mexico. These results are similar to the Q4 2013 results, when 6 per cent of the employers reported they employed about 18 temporary foreign workers. One-fifth of the construction employers reported

Temporary Foreign WorkersPercentage of companies that employed temporary foreign workers at the time of their survey





they employ temporary foreign workers, compared to none of the mining and health care and social assistance employers.

Five per cent of the employers anticipate hiring temporary foreign workers in the next year.

Five per cent of the employers surveyed in Q4 2014 anticipate applying for or hiring approximately 23 temporary foreign workers in the 12 months following their survey. In Q4 2013, 5 per cent of the employers anticipated applying for or hiring an additional 11 temporary foreign workers. In Q4 2014, 15 per cent of the employers in the construction industry anticipate hiring temporary foreign workers in the year following their survey. In contrast, none of the mining and oil and gas, professional, scientific and technical services, health care and social assistance and ‘other’ employers have plans to apply for or hire temporary foreign workers in the next year.

Comments

“I might apply for one if I can't find a qualified installer. I don't have a preference of what country a person comes from.” - Construction

“Quite possibly. I have a lady coming from South Africa and I might sponsor her.” - Finance, Insurance, Real Estate & Leasing

“We're looking at hiring two from the Philippines.” - Manufacturing

“No, we need experienced people. We're too small to have an assembly line with temporary foreign workers like the larger [companies]. We need people who can manufacture [our product] from beginning to end and that takes about 10 years of practice.” - Manufacturing

“I've thought about it but we usually try to find people in Alberta and then in Canada first.” - Mining & Oil & Gas

“It's the nature of our business that prevents us from looking for temporary foreign workers. They would need to be an owner-operator with their own truck to work here. It's too difficult to bring them over here without that.” - Transportation & Warehousing

“There's a good chance that we will. We're looking at hiring one to two.” - Transportation & Warehousing

“We applied but none of our applications were approved.” - Wholesale & Retail Trade

“I would like to but it's too much paperwork. We always have tons of problems finding and retaining our employees in the field.” - Wholesale & Retail Trade

“I know a lot of people are [applying for temporary foreign workers] but I don't know what it all entails.” - Wholesale & Retail Trade

Future Temporary Foreign WorkersPercentage of companies that anticipate applying for or hiring temporary foreign workers in the 12 months following their survey





RECRUITMENT METHODSWord of mouth/employee referrals and career and classified websites were the most commonly used recruitment methods in Q4 2014.

Overall, the most commonly used recruitment method for employers surveyed in Q4 2014 was word of mouth/employee referrals, followed by career and classified websites, walk-ins/unsolicited resumes and company website/internal postings. Fifteen cent of the micro-sized employers said they use social media such as Facebook, Twitter, and LinkedIn as a method for recruiting, up slightly from 11 per cent in 2013.

In Q4 2013, the top recruitment methods were word of mouth/employee referrals (80%), walk-ins/unsolicited resumes (57%), career and classified websites (51%), and company website/internal postings (26%).

Comments

“We don't advertise. What we do is very specialized and unusual, so we recruit by word of mouth and employee referral within our community.” - Accommodation & Food Services/Arts & Entertainment

“Of all the websites out there for employers, Kijii seems to be best one for us.” - Accommodation & Food Services/Arts & Entertainment

“We did go to schools in the past, but had no success and never even got an interview. We post with various online sites, but mostly on Kijiji because it's free.” - Construction

“Employment agencies are not our preferred method. We go to job fairs in the fall at MacEwan University and Mount Royal University.” - Finance, Insurance, Real Estate & Leasing

“It's all word of mouth and employee referral. It's sort of when we know someone is leaving they usually have a friend to replace them.” - Finance, Insurance, Real Estate & Leasing

We recruit mainly through Kijiji and schools like Columbia College, Acadia College and SAIT.” - Health Care & Social Assistance

“Our main recruitment methods are the Calgary Chamber of Volunteer Organizations and the Alberta College of Social Workers. As a charity, newspapers are too expensive. We post on quite a few job websites like Indeed and Kijiji. We've posted at U of C and MRU.” - Health Care & Social Assistance

“We have two young people from the local high school, one in the RAP program and the other in the work experience program. We also recruit at the Job Resource Centres in Airdrie and Olds.” - Manufacturing

1%!

1%!

4%!

5%!

5%!

7%!

9%!

10%!15%!

19%!

19%!

25%!

28%!

34%!

50%!

72%!

0%! 20%! 40%! 60%! 80%!

Radio!Magazines!

Job resource centres!High schools!

Job fairs!Signage!

Technical/trade institutes!College/universities!

Social media!Newspapers!

Employment agencies!Industry associations!

Company website/internal postings!Walk-ins/unsolicited resumes!Career & classified websites!

Word of mouth/employees referrals!



“The best method for me is to advertise in the local paper, then their postings end up online as well. I advertised for a designer and I got replies from all over the country, although I only advertised locally. Employment agencies, yes I use them but I haven't had any success with them.” - Manufacturing

“We post on Kijiji and that's it.” - Manufacturing

“I'm involved in the work experience program at the local high school in Canmore and then I employ those students over the summer.” - Manufacturing

“Word of mouth is the only way to find qualified people in our industry.” - Manufacturing

“For professional positions, I would say we use LinkedIn primarily. We also use Indeed and our company website.” - Manufacturing

“We usually just go to universities and our own website.” - Mining & Oil & Gas

“We pretty much just put ads on Job Bank.” - Professional, Scientific & Technical Services

“We use referrals from others in our industry. We used Monster, but it wasn't useful to us.” - Professional, Scientific & Technical Services

“The majority and the best ones come to us by referral. I've been in the industry for 40 years, and that has been my experience. I view newspaper ads as a necessary evil occasionally.” - Transportation & Warehousing

“We've been using temp agencies and just about any resource we can.” - Transportation & Warehousing

“It’s really just if someone comes in with a resume. We don't really have any specific strategies.” - Wholesale & Retail Trade

RECRUITING DIFFICULTIESTwenty-nine per cent of the employers reported having difficulty recruiting qualified employees.

Employers were asked questions regarding past and future recruiting difficulties. Specifically, they were asked if they had difficulty recruiting qualified employees in the 12 months prior to their survey, and if they anticipated having more, less or the same amount of difficulty recruiting qualified employees in the following 12 months.

Overall, 29 per cent of the employers surveyed in Q4 2014 reported they had difficulty recruiting qualified employees in the 12 months prior to their survey, down slightly from 31 per cent in 2013. Forty-five per cent of the construction and ‘other’ employers and 40 per cent of the wholesale and retail trade employers had difficulty recruiting, compared to only 10 per cent of the health care and social assistance employers.

Difficulty RecruitingPercentage of companies that had difficulty recruiting in the 12 months prior to their survey





Comments

“Up until now, no. Right now, however, we're having trouble finding experienced people.” - Accommodation & Food Services/Arts & Entertainment

“Yes, I've had difficulty for the last 20 years.” - Construction

“Yes, it's difficult to find construction labourers.” - Construction

“Yes, it’s difficult to find carpenters.” - Construction

“Yes, for hiring field positions.” - Construction

“It's hard to find honest people. I've decided not to look further.” - Finance, Insurance, Real Estate & Leasing

“It's difficult to find qualified people and to pay them competitive wages.” - Mining & Oil & Gas

“Yes, it's difficult to find installers.” - Mining & Oil & Gas

“Yes. We have had the same positions posted for about 6-7 months. It's just that the quality is not there.” - Transportation & Warehousing

“We do struggle. Canmore is a very difficult place to find people who want to work.” - Wholesale & Retail Trade

On balance, 3 per cent of the employers anticipate they will have more difficulty recruiting qualified employees over the next 12 months.

Ten per cent of the employers surveyed in Q4 2014 anticipate they will have more difficulty recruiting qualified employees in the 12 months following their survey, 7 per cent anticipate they will have less difficulty, and 83 per cent anticipate they will have the same difficulty, for a balance of 3 per cent.221 In Q4 2013, 1 per cent of the employers on balance anticipated they would have more difficulty recruiting qualified employees.

In Q4 2014, 20 per cent of the accommodation and food services/arts and entertainment employers anticipate they will have more difficulty recruiting qualified employees in the next 12 months. In contrast, 5 per cent of the health care and social assistance employers anticipate they will have less difficulty recruiting qualified employees in the next year. Employers in the construction, manufacturing, transportation and warehousing, finance, insurance, real estate and leasing and ‘other’ industries anticipate they will have about the same amount of difficulty recruiting qualified employees in the next year, as their balance of opinion was neutral.

1%# 3%#

%10%#%5%#0%#5%#10%#15%#

Q4#2013# Q4#2014#

Future&Recrui*ng&Difficul*es&Do#you#an1cipate#having#more,#less#or#the#same#difficulty#recrui1ng#qualified#employees#in#the#

next#12#months?#More# Less# Balance#



221 Percentage of employers that anticipate having more difficulty recruiting qualified employees in the 12 months following their survey minus the percentage of employers that anticipate having less difficulty.

Future Recruiting DifficultiesPercentage of companies that anticipated having more or less difficulty recruiting qualified employees in the 12 months following their survey

More Less Balance More Less BalanceOverall Results 6% 5% 1% 10% 7% 3%

Results by IndustryMining & Oil & Gas 0% 5% -5% 10% 5% 5%Construction 10% 0% 10% 15% 15% 0%Manufacturing 5% 0% 5% 5% 5% 0%Wholesale & Retail Trade 5% 0% 5% 15% 10% 5%Transportation & Warehousing 15% 0% 15% 10% 10% 0%Professional, Scientific & Technical Services 15% 10% 5% 10% 0% 10%Health Care & Social Assistance 0% 5% -5% 0% 5% -5%Accommodation & Food Services/Arts & Entertainment 0% 15% -15% 20% 0% 20%Finance, Insurance, Real Estate & Leasing 5% 5% 0% 5% 5% 0%Other 0% 10% -10% 10% 10% 0%

Q4 2013 Q4 2014

Comments

“More because business is booming in Banff and four of our competitors will be out of the market in the coming year.” - Accommodation & Food Services/Arts & Entertainment

“It's just so difficult in this business. I'm in trouble to find people who want to work and be properly trained.” - Manufacturing

“I don't think we will have any problems. Once we put an ad on Kijiji we get a huge response. When we posted for a part time driver we got 38 responses.” - Transportation & Warehousing

“That's tough to answer because it's dependent on what the oil prices do. When it goes down, people tend to become available. However, I expect the same hiring challenges overall.” - Transportation & Warehousing

“The last position I had an ad out for more than three months and only had one qualified applicant apply.” - Wholesale & Retail Trade

EMPLOYEE TURNOVER AND TURNOVER RATESForty-one per cent of the employers reported employees had voluntarily left their company in the prior year.

Overall, 41 per cent of the employers surveyed in Q4 2014 reported employees had left their company in the 12 months prior to their survey as a result of voluntary turnover,222 up from 37 per cent in Q4 2013.

In Q4 2014, 60 per cent of the finance, insurance, real estate and leasing employers said employees had voluntarily left their company in the prior year, up from 30 per cent in 2013. In contrast, only 30 per cent of the manufacturing employers reported voluntary employee turnover.

Employee TurnoverPercentage of companies with voluntary employee turnover in the 12 months prior to their survey





222 Initiated by the employee.

Overall, the turnover rate was 19 per cent for employers surveyed in Q4 2014.

The employers surveyed in Q4 2014 reported approximately 194 employees left their companies in the 12 months prior to their survey as a result of voluntary turnover. This equates to a turnover rate of 19 per cent. In Q4 2013, employers reported a total of 170 employees left their companies in the 12 months prior to their survey, resulting in a turnover rate of 17 per cent. In Q4 2014, the wholesale and retail trade industry had the highest turnover rate on average at 67 per cent, up from 43 per cent the previous year. The mining and oil and gas, construction and accommodation and food services/arts and entertainment industries had the lowest voluntary turnover rate at 11 per cent.

On balance, 8 per cent of the employers anticipate employee turnover will be lower over the next year.

Four per cent of the employers surveyed in Q4 2014 anticipate voluntary turnover will be higher in the 12 months following their survey and 12 per cent anticipate it will be lower, for a balance of 8 per cent anticipating turnover will be lower.223 In Q4 2013, 10 per cent of the employers on balance anticipated turnover would be lower in the year following their survey.

In Q4 2014, 20 per cent of the employers in the manufacturing and health care and social assistance industries anticipate employee turnover in their organizations will be lower in the next 12 months. Employers in the mining and oil and gas, wholesale and retail trade, accommodation and food services/arts and entertainment and ‘other’ industries anticipate turnover will be about the same on balance over the next year.

Employee TurnoverTurnover rates of companies (total turnover divided by total employees)in the 12 months prior to their survey



!10%%!8%%

!15%%

!10%%

!5%%

0%%

5%%

Q4%2013% Q4%2014%

Future&Turnover&Do%you%an2cipate%employee%turnover%will%be%

higher,%lower%or%the%same%in%the%next%12%months?%Higher% Lower% Balance%



223 Percentage of employers that anticipated voluntary turnover would be higher in the 12 months following their survey minus the percentage of employers that anticipated voluntary turnover would be lower.

Future TurnoverPercentage of companies that anticipated employee turnover would be higher or lower in the 12 months following their survey

Higher Lower Balance Higher Lower BalanceOverall Results 3% 13% -10% 4% 12% -8%

Results by IndustryMining & Oil & Gas 0% 20% -20% 5% 5% 0%Construction 5% 0% 5% 0% 5% -5%Manufacturing 5% 25% -20% 0% 20% -20%Wholesale & Retail Trade 0% 15% -15% 10% 10% 0%Transportation & Warehousing 5% 5% 0% 5% 15% -10%Professional, Scientific & Technical Services 5% 10% -5% 0% 15% -15%Health Care & Social Assistance 0% 5% -5% 0% 20% -20%Accommodation & Food Services/Arts & Entertainment 5% 5% 0% 5% 5% 0%Finance, Insurance, Real Estate & Leasing 0% 15% -15% 5% 15% -10%Other 0% 25% -25% 10% 10% 0%

Q4 2013 Q4 2014

Comments

“Higher because not too many people want to shovel snow when it's -30C.” - Other

“I expect lower because we've increased our wages to make them competitive.” - Transportation & Warehousing

“It's always the same role that tends to turnover. The rest are fairly solid.” - Wholesale & Retail Trade

RETENTIONA positive work environment was the most commonly reported retention strategy for micro-sized employers.

Employers were asked questions regarding current and future employee retention activities. Specifically, they were asked what strategies are their companies using to retain employees, and do they anticipate their company will be focusing more, less or the same on employee retention in the 12 months following their survey.

Overall, the most commonly reported retention strategy for employers surveyed in Q4 2014 was a positive work environment, followed by excellent management/supervision, competitive salary and interesting/challenging work. Results were slightly different for companies surveyed in Q4 2013, with a positive work environment mentioned by 92 per cent of the employers, followed by excellent management/supervision (89%), interesting/challenging work (86%) and excellent communication (83%).

Comments

“We have high wages compared to other industries in Banff. Here, you're either in construction or food and beverage. People stay for the money and very safe work conditions.” - Construction

24%!

37%!

40%!

51%!

56%!

65%!

65%!

65%!

71%!

76%!

76%!

77%!

82%!

0%! 20%! 40%! 60%! 80%! 100%!

Perks!

Reward and recognition programs!

Cash bonuses!

Competitive benefits package!

Social events!

Work/life balance!

Learning/growth opportunities!

Flexible work measures!

Excellent communication!

Interesting/challenging work!

Competitive salary!

Excellent management/supervision!

Positive work environment!



“We have a wellness program in which every employee can receive reimbursement for joining a gym or something similar. There’s the RRSP plan that we contribute to.” - Finance, Insurance, Real Estate & Leasing

“I don't have to worry about retention because I've had the same staff for five years.” - Finance, Insurance, Real Estate & Leasing

“I think it's that we all work part time and like the organization and the hours. We just don't have turnover because we're really flexible with our hours and we can work at home.” - Health Care & Social Assistance

“We offer benefits, but our employees don't want them. This is an easy job and it's not hard work, so it's easy for us to quickly train people.” - Manufacturing

“We have staff spa outings.” - Other

“We offer competitive salary, benefits and flexible hours. Those are our three main strategies.” - Other

“I'm paying 10-15 per cent more this year than last year and I still can't keep them. Our biggest perk is that there’s room for advancement.” - Other

“Cash bonuses and social events would be there if we had more employees.” - Other

“Flexibility is the key retention tool.” - Professional, Scientific & Technical Services

“They get a direct percentage of gross revenues, so they're in charge of planning their own pensions and benefits. It's a service-based industry and if that's your niche you will fit well as a courier. Our clientele is repeat business with 15-20 year clients. For the individual driver, the client likes to recognize a face who comes through the door. Each driver builds their own clientele of their own, as well as the company. Our perk is the Christmas party.” - Transportation & Warehousing

“Nobody wants to work here. Retention is not a focus.” - Transportation & Warehousing

“You cannot learn and grow too much at a convenience store.” - Wholesale & Retail Trade

“We give out free hockey tickets.” - Wholesale & Retail Trade

Fifteen per cent of the employers anticipate they will be focusing more on employee retention over the next year.

Overall, 15 per cent of the employers surveyed in Q4 2014 anticipate they will be focusing more on employee retention in the 12 months following their survey, up slightly from the 2013 results.

One quarter of the employers in the construction and wholesale and retail trade industries anticipate they will be focusing more on retention in the next year, both up from the 2013 results. In contrast, 10 per cent or fewer of the mining and oil and gas, health care and social assistance and finance, insurance, real estate and leasing employers plan to focus more on employee retention in the next 12 months.

12%$15%$

&5%$0%$5%$

10%$15%$20%$

Q4$2013$ Q4$2014$

Future&Reten)on&Do$you$an1cipate$focusing$more,$less$or$the$same$on$employee$reten1on$in$the$next$12$months?$

More$ Less$ Balance$



Future RetentionPercentage of companies that anticipated they would be focusing more or less on employee retentionin the 12 months following their survey

More Less Balance More Less BalanceOverall Results 15% 3% 12% 17% 2% 15%

Results by IndustryMining & Oil & Gas 5% 5% 0% 10% 10% 0%Construction 15% 5% 10% 25% 0% 25%Manufacturing 25% 0% 25% 20% 0% 20%Wholesale & Retail Trade 20% 5% 15% 25% 0% 25%Transportation & Warehousing 30% 0% 30% 15% 0% 15%Professional, Scientific & Technical Services 5% 10% -5% 15% 0% 15%Health Care & Social Assistance 20% 0% 20% 10% 0% 10%Accommodation & Food Services/Arts & Entertainment 0% 0% 0% 15% 0% 15%Finance, Insurance, Real Estate & Leasing 15% 0% 15% 10% 0% 10%Other 15% 0% 15% 25% 5% 20%

Q4 2013 Q4 2014

Comments

“We will try to increase the bonuses and salaries.” - Accommodation & Food Services/Arts & Entertainment

“Reward and recognition and benefits, we're working on that.” - Construction

“Cash bonuses and rewards and recognition will be added soon.” - Manufacturing

“We've had people for nine, 15 and 17 years, so I expect our focus will remain the same.” - Other

“It's been the same for most of our history, maybe 12 to 20 years.” - Professional, Scientific & Technical Services

“It's always a very high priority for us.” - Transportation & Warehousing

“We haven't got the directive from our central HR department, but they're speaking about more focus on retention for Alberta and BC.” - Transportation & Warehousing

“We will have to focus more because we lose so many workers to voluntary turnover.” - Wholesale & Retail Trade

“We have a new HR person who will hopefully help retain our employees.” - Wholesale & Retail Trade

“We will be focusing a little bit more on retaining key staff and probably giving them more money.” - Wholesale & Retail Trade

SUPPLEMENTAL QUESTIONS – PERSONS WITH DISABILITIESIn addition to the general questions about recruitment and retention practices, employers were asked the following specific questions about persons with disabilities:

To the best of your knowledge, does your company currently employ individuals with a disability?

Does your company proactively recruit individuals with disabilities? If yes, what strategies does your company use to proactively recruit persons with disabilities?

How much of a challenge are the following factors to your company in hiring persons with disabilities? Please indicate whether it is a major challenge, a minor challenge or not a challenge. (Employers were given a list of factors)



Fifteen per cent of the employers reported they currently employ persons with disabilities.

Fifteen per cent of the micro-sized employers (30 employers) reported they employ a total of 40 persons with disabilities, 84 per cent reported they do not currently employ persons with disabilities, and 1 per cent were unsure. Thirty-five per cent of the wholesale and retail trade employers reported they currently employ persons with disabilities, compared to none of the mining and oil and gas employers.

Does your company currently employ persons with disabilities?

Comments

“We have one employee with limitations because of past alcohol and drug abuse.” - Accommodation & Food Services/Arts & Entertainment

“Yes, we have two employees with a disability.” - Construction

“We hired a person who used to be on AISH and is now on old age security. He's over 65 and a part time person. He works when he can and goes home if he's not feeling well. The job that he does is excellent and this flexible position works for him. He's been working here for eight years now.” - Finance, Insurance, Real Estate & Leasing

“At least one, myself. I have a hearing disability.” - Finance, Insurance, Real Estate & Leasing

“We have a practicum student that has some mobility limitations and I do myself as well.” - Health Care & Social Assistance

“I have a couple of employees with psychological challenges.” - Health Care & Social Assistance

“We have one employee with a slight mobility disability.” - Manufacturing

“Yes, we have two people.” - Other

0%#5%#5%#15%#15%#15%#15%#20%#25%#

35%#15%#

0%# 10%# 20%# 30%# 40%# 50%# 60%# 70%# 80%# 90%#100%#

Mining#&#Oil#&#Gas#Construc=on#

Transporta=on#&#Warehousing#Manufacturing#

Prof.,#Scien=fic#&#Tech.#Services#Health#Care#&#Social#Assistance#

Other#Accomm.#&#Food/Arts#&#Ent.#Fin.,#Ins.,#Real#Est.#&#Leasing#

Wholesale#&#Retail#Trade#Total#

Yes# No# Unsure#



“We have a couple of employees who are high functioning, but have a disability.” - Professional, Scientific & Technical Services

“Yes, myself.” - Professional, Scientific & Technical Services

“Yes, at least two that I know of for sure.” - Professional, Scientific & Technical Services

“Yes, there are two employees.” - Transportation & Warehousing

“I have a hearing deficiency.” - Wholesale & Retail Trade

“We do have one. The person took some time off but is supposed to come back soon.” - Wholesale & Retail Trade

“We have one person with mobility issues.” - Wholesale & Retail Trade

“Yes, one person with emotional and psychological conditions.” - Wholesale & Retail Trade

“I myself have hearing in only one ear.” - Wholesale & Retail Trade

Seven per cent of the employers said they proactively recruit persons with disabilities.

Seven per cent (12 employers) reported they proactively recruit persons with disabilities. The top strategy used to proactively recruit persons with disabilities is: we provide alternate work arrangements for persons with disabilities (11 employers), followed by we have made our offices accessible to employees and customers with disabilities (10 employers), we include people with disabilities in our diversity recruitment goals (six employers) and we provide mentorship to job seekers who have disabilities (five employers).

Strategies Used to Proactively Recruit Persons with Disabilities

1"

1"

1"

5"

6"

10"

11"

0" 3" 6" 9" 12"

We"use"word"of"mouth"

We"post"job"announcements"in"disability"related"publica>ons"or"on"disability"related"websites""

We"contact"disability"serving"organiza>ons"to"refer"job"seekers"

We"provide"mentorship"to"persons"with"disabili>es"

We"include"people"with"disabili>es"in"our"diversity"recruitment"goals""

We"have"made"our"offices"accessible"to"employees"and"customers"with"disabili>es"

We"provide"alternate"work"arrangements"for"persons"with"disabili>es""

Number'of'Employers'



Comments

“We don't actively recruit persons with disabilities but we would sure not discount them because of any disability.” - Accommodation & Food Services/Arts & Entertainment

“We can't due to the nature of the work. There's too much liability there.” - Construction

“No, not proactively. If someone is skilled and experienced, the fact that may have a disability doesn't concern us.” - Construction

“We are making several adjustments to handle a current employee's new disability.” - Finance, Insurance, Real Estate & Leasing

“We would certainly accommodate any disabilities.” - Health Care & Social Assistance

“For over 10 years we did have someone with a learning disability. We're certainly open to it and would do everything we can to support these individuals.” - Health Care & Social Assistance

“Not on a proactive basis. It would be difficult because I have a lot of stairs in my business and no wheelchair access to the upper floor.” - Manufacturing

“We do involve adults with disabilities in our volunteer programs.” - Other

“It's difficult in a hands on environment. I would not dissuade anybody from applying, but most people with disabilities realize it's a tough work environment for them. We are a disability compliant building though.” - Transportation & Warehousing

“We have had staff in past that have had hearing disabilities.” - Wholesale & Retail Trade

“Yes, we do through word of mouth.” - Wholesale & Retail Trade

The top challenge employers face when it comes to hiring or employing persons with disabilities relates to the nature of their work.

Overall, 67 per cent of the employers (133 employers) indicated that the nature of our work is such that it cannot be effectively performed by people with disabilities is a challenge when it comes to hiring or employing persons with disabilities. Forty per cent of the employers reported it is a major challenge and 27 per cent of the employers said it is a minor challenge. The cost of accommodating workers with disabilities is prohibitive is the next biggest challenge, reported by 56 per cent of the employers (111 employers). Thirty-three per cent said the cost of accommodating is a major challenge and 23 per cent said it is a minor challenge. In addition, 52 per cent of the employers said safety is a challenge, with 33 per cent saying it is a major challenge and 29 per cent saying it is a minor challenge.



Challenges Employing Persons with Disabilities

Comments

“It's the nature of the business because there's so many liabilities attached to a wilderness guiding business. Safety is the biggest for the company and others involved. Someone with a disability working in our office is a totally different situation though.” - Accommodation & Food Services/Arts & Entertainment

“The nature of the work is the essence of the challenge. The jobs are outdoor labour with horses, so anyone with limited mobility just is not going to work out. We're such a small enterprise that cost is a factor, so it really hasn't served us to explore hiring persons with disabilities.” - Accommodation & Food Services/Arts & Entertainment

“There's just no way I could. We have too many stairs in the building.” - Accommodation & Food Services/Arts & Entertainment

“It would depend on the disability. I've never had anyone who applied. Everyone is very accommodating and realizes it's important to integrate everyone into the workforce because we need everyone. Someone with a disability might try harder than someone without one in my opinion. Somebody who comes into a workplace that knows they have a disability and is conscious of that I think would work harder to overcome that. I don't see it as an issue at all. Our work environment is safe for everybody, with or without a disability. I think the least safe employee is not a person with a disability at all, it's someone who thinks they already know everything about safety.” - Accommodation & Food Services/Arts & Entertainment

“It's really hard to answer this because it really depends on the disability and the degree of accommodation required. We're in the building industry, so our employees need to be physically active. Someone could not do the work if they're in a wheelchair or visually impaired for example. There are some cases where someone would not be able to complete this kind of work. If the disability could be accommodated, however, it would be if they're the right candidate. Safety, we would never put someone with a disability in a safety compromised environment. If they're just doing office work, then it's not a problem.” - Construction

5%#

13%#

15%#

15%#

16%#

24%#

33%#

24%#

33%#

33%#

40%#

1%#

12%#

15%#

18%#

17%#

22%#

13%#

22%#

19%#

23%#

27%#

0%# 20%# 40%# 60%# 80%# 100%#

Very#few/no#persons#with#disabili?es#submit#applica?ons#for#open#posi?ons#

ADtudes#of#coEworkers#make#it#difficult###

The#cost#of#providing#benefits#for#workers#with#disabili?es#is#prohibi?ve###

ADtudes#of#customers/clients#make#it#difficult#

The#cost#of#Workers#Compensa?on#premiums#for#workers#with#disabili?es#is#prohibi?ve#

Lack#of#knowledge#or#informa?on#about#people#with#disabili?es#

It#is#difficult#to#find#persons#with#disabili?es#that#are#qualified#to#do#the#work#

Lack#of#knowledge#of#disability#related#employment#support#available#to#employers#through#the#prov.#or#fed.#government#

Safety#

The#cost#of#accommoda?ng#workers#with#disabili?es#is#prohibi?ve##

The#nature#of#our#work#is#such#that#it#cannot#be#effec?vely#performed#by#people#with#disabili?es#

Major#challenge# Minor#challenge# Not#a#challenge/Unsure#



“I think it's going to be a major challenge in all aspects. It's too difficult for a person with a disability to work in our field, in construction. It's just not feasible. It's very demanding work to be in the flooring installation business. I've never even had a person with a disability approach me to work in this field.” - Construction

“The nature of the work would depend upon the disability. In carpentry, you could be deaf for example.” - Construction

“It depends on the disability and the role. A person in a wheelchair could do my job in the office for example.” - Construction

“Real estate is a people business, so we can't have people with disabilities. ” - Finance, Insurance, Real Estate & Leasing

“It's office work so they would need to be good speaking on the phone, but as far as a physical disability we are wheelchair accessible. It would depend on the disability. No one has applied.” - Finance, Insurance, Real Estate & Leasing

“There are no challenges. The only challenge we have is that the back door is up a couple of stairs. However, I could definitely change it to a ramp if we hired someone who needed that. We have no problems hiring persons with disabilities.” - Finance, Insurance, Real Estate & Leasing

“It would depend on the disability because in a counseling environment we need employees to be emotionally stable. We have an elevator and an accessible office space. However, one problem that has been a challenge for clients with disabilities has been that the office is wheelchair friendly and our washrooms are too, but our smaller counseling offices don't accommodate so special arrangements have to be made.” - Health Care & Social Assistance

“We have some limitations in our building and we're a charity. For physical limitations, our building is old so it wasn't built to be fully accessible. People have to have the professional knowledge and skills needed to do the work, and that's what matters most to us.” - Health Care & Social Assistance

“We're always willing to train. However, where we put them is the major challenge. We're willing to work with anyone who shows up and is not drunk. Transportation is the biggest challenge for us. We're not in Calgary, so although we're open to it we would have to find someone in the local community or someone who has their own transportation.” - Manufacturing

“I'm for hiring persons with disabilities. About 70% of the work would be not a problem, although people with certain disabilities can't go up 30 feet on a ladder for example.” - Manufacturing

“We are on the second floor with no elevator. That's the only reason there would be a challenge. Our technicians sit 90% of time, so we are otherwise equipped for persons with disabilities.” - Manufacturing

“That depends on what type of disability. Physical disabilities would be very difficult in the oilfield.” -Mining & Oil & Gas

“Certain disabilities would be difficult to accommodate because our office is on the second floor and there is no elevator. Lack of access is the only concern.” - Other

“We are an accounting company, so it's going to be major challenge in every aspect. I don't see how a person with a disability could fit into my company for bookkeeping or accounting.” - Professional, Scientific & Technical Services



“You have to be able to maneuver a significant number of stairs to get to the office, so costs of accommodation would be prohibitive.” - Professional, Scientific & Technical Services

“In our industry, you have to have a driver's license and mobility in terms of moving things. I would have no troubles with an employee who was qualified and could make it work. There could be liability, but the person could do fine if they're able. We don't have a paid office staff, so there's no positions for them there. If we were bigger, that opportunity to hire somebody with a disability would be much greater. When a company is larger, the opportunities are more varied. We would entertain an applicant, but there's always an element of ability and corporate need in our hiring decision.” - Transportation & Warehousing

“It would be no challenge because we already employ people with disabilities.” - Transportation & Warehousing

“We absolutely can't. We fly airplanes. We operate highly technical equipment, so we can't have anyone with any disability in that environment. Even a simple thing like a heart murmur would not pass the medical to be a pilot here. The work is otherwise pretty demanding. We use photometric mapping, so our employees need stereoscopic vision.” - Transportation & Warehousing

“This is a small liquor store, but I think everyone could work here. I think we have good opportunities for a person with a disability, but we are not currently hiring.” - Wholesale & Retail Trade



Job Bank AnalysisService Canada’s Job Bank is the country’s largest bi-lingual online listing of job opportunities in Canada. Job seekers are able to view thousands of new job opportunities across Canada every day and access online tools such as Job Match, Job Alert, Resume Builder and Career Navigator free of charge. The site also has a training and careers section, which helps job seekers identify career options, as well as provides information on trends, employment prospects and salary ranges of occupations. Employers have access to a variety of HR management information resources and can advertise and manage their job postings online at their own convenience free of charge.

This section provides a summary of jobs posted to the Job Bank in the fourth quarter of 2014 for Calgary, the communities surrounding Calgary, and the Banff/Canmore region.

Calgary (city)For Calgary (city), there were 10,261 job postings on the Job Bank in the fourth quarter of 2014, advertising for a total of 25,815 positions.224 This was down from 26,318 positions the previous quarter and down from 26,873 positions year-over-year. Two-thirds of the job postings were from companies located in East Calgary, while the remaining job postings were from companies located in West Calgary.

Job Bank: Job Ad Postings by Quadrant for Q4 2014Calgary (city)

North West!12%!

South West!21%!

North East!29%!

South East!38%!



224 Total job postings are all unduplicated postings appearing in the Job Bank each week. This figure includes postings from the previous weeks that have been reposted as well as new job postings.

Thirty-nine per cent (9,972 positions) were sales and service occupations, down from 10,929 positions in the fourth quarter of 2013. Thirty-five per cent (9,143 positions) were trades, transport and equipment operators occupations, up from 8,248 positions year-over-year.

Job Bank: Number of Job Positions by Occupation for Q4 2013 and 2014Calgary (city)

189 !

465 !

564 !

571 !

1,012 !

1,019 !

1,077 !

1,803 !

9,143 !

9,972 !

216 !

527 !

784 !

661 !

967 !

1,085 !

1,169 !

2,287 !

8,248 !

10,929 !

- ! 2,000 ! 4,000 ! 6,000 ! 8,000 ! 10,000 ! 12,000 !

Health Occupations!

Occupations in Social Science, Education, Government Service & Religion!

Occupations in Art, Culture, Recreation & Sport!

Occupations Unique to Primary Industry!

Management Occupations!

Natural & Applied Sciences & Related Occupations!

Occupations Unique to Processing, Manufacturing & Utilities!

Business, Finance & Administration Occupations!

Trades, Transport & Equipment Operators & Related Occupations!

Sales & Service Occupations!

2013! 2014!

The top five occupations advertised on the Job Bank in the fourth quarter of 2014 for Calgary (city) were food counter attendants, kitchen helpers and related occupations (1,936 positions), cooks (1,292 positions), material handlers (1,204 positions), retail salespersons and sales clerks (1,144 positions) and construction trades helpers and labourers (1,048 positions). In comparison, the top five occupations in the fourth quarter of 2013 for Calgary were food counter attendants, kitchen helpers and related occupations (2,530 positions), material handlers (1,357 positions), cooks (1,074 positions), construction trades helpers and labourers (1,042 positions) and retail salespersons and sales clerks (1,033 positions).



Calgary (city) Positions - Q4 2014225

NOC Code Occupation Positions

6641 Food Counter Attendants, Kitchen Helpers and Related Occupations 1,936 6242 Cooks 1,292 7452 Material Handlers 1,204 6421 Retail Salespersons and Sales Clerks 1,144 7611 Construction Trades Helpers and Labourers 1,048 6212 Food Service Supervisors 982 7411 Truck Drivers 919 7271 Carpenters 912 6661 Light Duty Cleaners 701 6474 Babysitters, Nannies and Parents' Helpers 500 7284 Plasterers, Drywall Installers and Finishers and Lathers 481 8612 Landscaping and Grounds Maintenance Labourers 410 6453 Food and Beverage Servers 387 6611 Cashiers 360 9619 Other Labourers in Processing, Manufacturing and Utilities 334 5254 Program leaders and instructors in recreation, sport and fitness 323 0631 Restaurant and Food Service Managers 315 1453 Customer Service, Information and Related Clerks 287 7291 Roofers and Shinglers 285 7282 Concrete Finishers 281 6211 Retail Trade Supervisors 280 7321 Automotive service technicians, truck and bus mechanics and mechanical repairers 218 6622 Store shelf stockers, clerks and order fillers 210 4212 Social and community service workers 209 7441 Residential and Commercial Installers and Servicers 206 7272 Cabinetmakers 201 7322 Motor Vehicle Body Repairers 196 7421 Heavy Equipment Operators (Except Crane) 195 6671 Operators and Attendants in Amusement, Recreation and Sport 193 1471 Shippers and Receivers 186 7414 Delivery and Courier Service Drivers 185 0621 Retail Trade Managers 183 7293 Insulators 176 6662 Specialized Cleaners 175 6411 Sales Representatives - Wholesale Trade (Non-Technical) 169 7312 Heavy-Duty Equipment Mechanics 169 7265 Welders and Related Machine Operators 168 0711 Construction Managers 153 6663 Janitors, Caretakers and Building Superintendents 149 7251 Plumbers 148 1474 Purchasing and Inventory Clerks 146 6215 Cleaning Supervisors 143 2171 Information Systems Analysts and Consultants 141 1411 General office support workers 134 7443 Automotive Mechanical Installers and Servicers 134 9617 Labourers in food, beverage and associated products processing 132 6651 Security Guards and Related Occupations 123 6241 Chefs 121 6435 Hotel Front Desk Clerks 121 7294 Painters and decorators (except interior decorators) 121 7241 Electricians (Except Industrial and Power System) 120 7283 Tilesetters 119 7311 Construction millwrights and industrial mechanics 114 1431 Accounting and Related Clerks 113 6623 Other sales related occupations 111 0611 Sales, Marketing and Advertising Managers 108 6221 Technical Sales Specialists - Wholesale Trade 105 7261 Sheet Metal Workers 104 1472 Storekeepers and Parts Clerks 102 7264 Ironworkers 100



225 Only occupations with 100 or more positions are shown in the table.

Communities Surrounding CalgaryFor the communities surrounding Calgary,226 there were 2,386 job postings on the Job Bank in the fourth quarter of 2014, advertising for a total of 7,242 positions. This was relatively unchanged from 7,235 positions the previous quarter but up from 6,159 positions year-over-year. Thirty-six per cent (2,589 positions) were sales and service occupations, up from 2,346 positions in the fourth quarter of 2013, and 33 per cent (2,409 positions) were trades, transport and equipment operators occupations, up from 2,156 positions year-over-year.

Job Bank: Number of Job Positions by Occupation for Q4 2013 and 2014Communities Surrounding Calgary

7 !

32 !

69 !

133 !

183 !

183 !

771 !

866 !

2,409 !

2,589 !

22 !

41 !

63 !

127 !

167 !

258 !

564 !

415 !

2,156 !

2,346 !

- ! 400 ! 800 ! 1,200 ! 1,600 ! 2,000 ! 2,400 ! 2,800 !



Health Occupations!








2013! 2014!

The top five occupations advertised on the Job Bank in the fourth quarter of 2014 for the communities surrounding Calgary were industrial butchers and meat cutters, poultry preparers and related workers (655 positions), food counter attendants, kitchen helpers and related occupations (631 positions), cooks (404 positions), truck drivers (339 positions) and food service supervisors (298 positions). In comparison, the top five occupations advertised in the fourth quarter of 2013 for the communities surrounding Calgary were food counter attendants, kitchen helpers and related occupations (614 positions), retail salespersons and sales clerks (378 positions), truck drivers (350 positions), cooks (277 positions) and babysitters, nannies and parents’ helpers (227 positions).



226 Including, but not limited to, Cochrane, Airdrie, Chestermere, Okotoks and High River.

Communities Surrounding Calgary Positions - Q4 2014227


9462 Industrial Butchers and Meat Cutters, Poultry Preparers and Related Workers 6556641 Food Counter Attendants, Kitchen Helpers and Related Occupations 6316242 Cooks 4047411 Truck Drivers 3396212 Food Service Supervisors 2986474 Babysitters, Nannies and Parents' Helpers 2617611 Construction Trades Helpers and Labourers 2608612 Landscaping and Grounds Maintenance Labourers 2497271 Carpenters 1816421 Retail Salespersons and Sales Clerks 1748432 Nursery and Greenhouse Workers 1667284 Plasterers, Drywall Installers and Finishers and Lathers 1228431 General Farm Workers 1206661 Light Duty Cleaners 1057441 Residential and Commercial Installers and Servicers 1046622 Store shelf stockers, clerks and order fillers 1007252 Steamfitters, Pipefitters and Sprinkler System Installers 1009617 Labourers in food, beverage and associated products processing 1008253 Farm Supervisors and Specialized Livestock Workers 947452 Material Handlers 917291 Roofers and Shinglers 907242 Industrial Electricians 887421 Heavy Equipment Operators (Except Crane) 876611 Cashiers 826211 Retail Trade Supervisors 800631 Restaurant and Food Service Managers 797283 Tilesetters 727312 Heavy-Duty Equipment Mechanics 687321 Automotive service technicians, truck and bus mechanics and mechanical repairers 687219 Contractors & Supervisors, Other Construction Trades, Installers, Repairers & Servicers 677264 Ironworkers 657282 Concrete Finishers 646671 Operators and Attendants in Amusement, Recreation and Sport 607294 Painters and decorators (except interior decorators) 576215 Cleaning Supervisors 556662 Specialized Cleaners 557265 Welders and Related Machine Operators 538615 Oil and Gas Drilling, Servicing and Related Labourers 537292 Glaziers 527443 Automotive Mechanical Installers and Servicers 516651 Security Guards and Related Occupations 459619 Other Labourers in Processing, Manufacturing and Utilities 432225 Landscape and horticulture technicians and specialists 427311 Construction millwrights and industrial mechanics 428251 Farmers and Farm Managers 380621 Retail Trade Managers 376453 Food and Beverage Servers 377612 Other Trades Helpers and Labourers 327241 Electricians (Except Industrial and Power System) 316216 Other Service Supervisors 288611 Harvesting Labourers 282145 Petroleum Engineers 273112 General Practitioners and Family Physicians 266435 Hotel Front Desk Clerks 236623 Other sales related occupations 217322 Motor Vehicle Body Repairers 216221 Technical Sales Specialists - Wholesale Trade 207245 Telecommunications Line and Cable Workers 202243 Industrial Instrument Technicians and Mechanics 178256 Supervisors, Landscape and Horticulture 174214 Early Childhood Educators and Assistants 166482 Estheticians, Electrologists and Related Occupations 161414 Receptionists and Switchboard Operators 151453 Customer Service, Information and Related Clerks 157215 Contractors and Supervisors, Carpentry Trades 157251 Plumbers 159493 Other Wood Products Assemblers and Inspectors 159516 Other Metal Products Machine Operators 15




Banff/Canmore AreaFor the Banff/Canmore area, there were 884 job postings on the Job Bank in the fourth quarter of 2014, advertising for a total of 3,416 positions. This was down from 3,712 positions the previous quarter but up from 2,070 positions in the fourth quarter of 2013. Sales and service occupations accounted for 90 per cent of the total positions in the fourth quarter of 2014.

Job Bank: Number of Positions by Occupation for Q4 2013 and 2014Banff/Canmore Area

6 !

12 !

15 !

17 !

22 !

25 !

80 !

81 !

124 !

3,330 !

13 !

21 !

7 !

9 !

11 !

30 !

60 !

250 !

68 !

1,819 !

- ! 500 ! 1,000 ! 1,500 ! 2,000 ! 2,500 ! 3,000 ! 3,500 !




Health Occupations!







2013! 2014!

The top five occupations advertised on the Job Bank in the fourth quarter of 2014 for the Banff/Canmore area were food counter attendants, kitchen helpers and related occupations (1,197 positions), food service supervisors (877 positions), light duty cleaners (357 positions), cooks (159 positions) and hotel front desk clerks (74 positions). The top five occupations advertised on the Job Bank in the fourth quarter of 2013 for the Banff/Canmore area were food counter attendants, kitchen helpers and related occupations (495 positions), food service supervisors (308 positions), light duty cleaners (284 positions) program leaders and instructors in recreation, sport and fitness (180 positions) and cooks (129 positions).



Banff/Canmore Area Positions - Q4 2014228


6641 Food Counter Attendants, Kitchen Helpers and Related Occupations 1,197 6212 Food Service Supervisors 877 6661 Light Duty Cleaners 357 6242 Cooks 159 6435 Hotel Front Desk Clerks 74 6421 Retail Salespersons and Sales Clerks 65 5254 Program leaders and instructors in recreation, sport and fitness 53 0631 Restaurant and Food Service Managers 46 6671 Operators and Attendants in Amusement, Recreation and Sport 42 6241 Chefs 37 6453 Food and Beverage Servers 36 6441 Tour and Travel Guides 34 6211 Retail Trade Supervisors 28 6663 Janitors, Caretakers and Building Superintendents 26 6216 Other Service Supervisors 23 6442 Outdoor Sport and Recreational Guides 22 6215 Cleaning Supervisors 16 7251 Plumbers 16 8431 General Farm Workers 16 6622 Store shelf stockers, clerks and order fillers 13 7611 Construction Trades Helpers and Labourers 12 7241 Electricians (Except Industrial and Power System) 11 0611 Sales, Marketing and Advertising Managers 10 3235 Other Technical Occupations in Therapy and Assessment 10 9414 Concrete, Clay and Stone Forming Operators 10 0632 Accommodation Service Managers 9 0621 Retail Trade Managers 8 7281 Bricklayers 8 4214 Early Childhood Educators and Assistants 7 6252 Bakers 7 6611 Cashiers 7 0721 Facility Operation and Maintenance Managers 6 1225 Purchasing Agents and Officers 6 6483 Pet Groomers and Animal Care Workers 6 6623 Other sales related occupations 6 6681 Dry Cleaning and Laundry Occupations 6 6682 Ironing, Pressing and Finishing Occupations 6 7311 Construction millwrights and industrial mechanics 6 7412 Bus Drivers and Subway and Other Transit Operators 6 6214 Dry Cleaning and Laundry Supervisors 5 6662 Specialized Cleaners 5 6672 Other Attendants in Accommodation and Travel 5 8253 Farm Supervisors and Specialized Livestock Workers 5




Appendix ASurvey MethodologyThe Q4 2014 Calgary and Area Employer Survey is based on responses to a telephone questionnaire conducted in October, November and December 2014. The survey sampled 200 Calgary and area employers with <10 employees. Following are the number of respondents from each industry sector included in the sample:

Industry Number of Respondents

Mining & Oil & Gas 20Construction 20Manufacturing 20Wholesale & Retail Trade 20Transportation & Warehousing 20Professional, Scientific & Technical Services 20Health Care & Social Assistance 20Accommodation & Food Services/Arts & Entertainment 20Finance, Insurance, Real Estate & Leasing 20Other 20Total 200

The ‘Other’ industry category includes a variety of companies from the remainder of the industry categories: Agriculture, Utilities, Information & Culture, Management of Companies, Administrative & Support Services, Educational Services, Other Services and Public Administration.

It should be noted that the method of sample selection provides a good cross-section of opinion. Nevertheless, given the size of the sample, the statistical reliability of the survey is limited, particularly when the data is reported by industry. The value of this survey, however, goes beyond the data captured by the questionnaire. The telephone interview allows companies to expand on their responses, which provides invaluable information and comments that cannot be measured quantitatively.



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