Is Canada up Dawsons creek without a paddle?

[mistercorporate]

Originally Posted by Stryker

This part I don't get consulting and such, were these companies not doing any business with alberta companies? I understand that dollar makes us more attractive but I do not understand how that magically offsets a huge lack of money coming in from a large portion of the country.

It's not just oil that is getting hurt, any retail relying on american goods is obviously gonna get hit hard etc etc.

Again things like tourism and Manufacturing are hit hard by people with less money. This the stuff that makes no sense. Say what you want about oil workers that money goes right back into the economy. Tourism(bars' resturants etc, are the kinds of place that you can see this directly)

Contrary to popular belief, consulting and financial services in Alberta are primarily served by local branches. There is virtually no consulting geared towards O&G in Ontario but there are a number of firms such as Deloitte and E&Y who have a strong presence in the oil patch. Losses there will effect Ontario headquarters to the tune of tens of millions each but the massive windfall from a surging US economy and weak dollar benefits local headquarters to the tune of a billion or so each for the larger companies. The US is just such an economic behemoth. Canada is surprisingly poorly integrated in terms of trade. Companies like IBM Canada are notorious for making massive layoffs during lean times when a particular hub is uncompetitive and massive hiring and promoting sprees when circumstances are conducive, all this is done in very short order.

[Beedok]

I do find it odd how issues in Northern Ontario are used to say Ontario is sufering. The north is like 800K out of 14 million people.

Also why does it seem like BC is forgotten about in every conversation? I don't know if this is helping them or hurting them more right now, but with half their population right beside the US, and there surely being some manufacturing it seems like it could easily be good news for them too.

[Acajack]

Originally Posted by Beedok

I do find it odd how issues in Northern Ontario are used to say Ontario is sufering. The north is like 800K out of 14 million people.

.

By Canadian standards, to quote Mistercorporate, Ontario is a "behemoth"...

[CanSpice]

Originally Posted by Beedok

I do find it odd how issues in Northern Ontario are used to say Ontario is sufering. The north is like 800K out of 14 million people.

Also why does it seem like BC is forgotten about in every conversation? I don't know if this is helping them or hurting them more right now, but with half their population right beside the US, and there surely being some manufacturing it seems like it could easily be good news for them too.

It's good for BC's IT sector, that's for sure. Now all of a sudden an American company can pay a developer C$100k (so their total cost is probably about C$200k), which corresponds to them shelling out US$137k. There's nobody in Silicon Valley, for example, who's going to work for US$65k, so hiring a Canadian comes at a huge discount.

And say you're an IT services company. The US is a huge customer, and all of a sudden by charging the same USD price you're making 30% more money without having to do anything.

[WhipperSnapper]

Originally Posted by mistercorporate

Jesus Christ, is this a conversation with a sobre adult or a drunken old man? The majority of Ontario's economy is in services. With the lower dollar our services can be exported with a strong value proposition. IT services, financial services, consulting services, etc., etc. Unlike what some person said earlier finance is not a crutch, its a huge revenue generating service industry. For example, TD Bank has one of the largest branch networks in the US, it gets revenues back in US dollars and its high value exports in terms of wealth management etc. are cheaper due to the low dollar. Suddenly billions of dollars are flowing here due to the weaker dollar and we're not even mentioning manufacturing and tourism which are indeed growing. Ever driven around the GTA? These thousands of manufacturing plants you see are producing hundreds of niche and differentiated goods, its not just cars as the stereotype goes..

A low dollar is good for manufactoring in Ontario but it is certainly not booming and the impact of commodities production/exploration is being felt. Very little actually trickles to Canada from our Banks' operations in the US. They are separate companies within the group. However, a few banks are still dealing with the huge debt load from the initial US acquisitions.

[csbvan]

Originally Posted by Beedok

I do find it odd how issues in Northern Ontario are used to say Ontario is sufering. The north is like 800K out of 14 million people.

Also why does it seem like BC is forgotten about in every conversation? I don't know if this is helping them or hurting them more right now, but with half their population right beside the US, and there surely being some manufacturing it seems like it could easily be good news for them too.

The low dollar has certainly been good for BC's economy- tourism, tech, exports, manufacturing, housing, etc. It posted the highest job gain percentage for 2015 and led the country in GDP growth, and will do so again this year. People in BC complain about the high dollar as it makes life more expensive, but the BC government is certainly not complaining.

[whatnext]

Originally Posted by Stryker

Seriously I don't get it, I'm absolutely baffled how people aren't thinking it's a big deal.

I'm search for articles online that don't paint Canada as absolutely fawked, however the more and more I read about the Iran saudi situation the more it seems logical that our oil is worth very little.

I for the life of me can't understand how anyone thinks a collapse of a primary industry means that things are just gonna be corrected by a lower dollar.

I'm genuinely curious about this, but I still can't fathom the technical details.

Our oil is of a very low quality, it's expensive to produce, it seems quite logical that our role is dimishing as Iran starts kicking out higher quality oil, along with russian and sauidis who are kicking out a great deal as well.

Without knowing how old every poster is, it's fair to say many of us have been here before. We've lived with low oil prices and a low dollar. And we survived. Absolutely it will kick NFLD harder than most places, but that's always been the case hasn't it?

[Pinus]

Originally Posted by Beedok

Also why does it seem like BC is forgotten about in every conversation.

Or Manitoba, or New Brunswick, or......

[Acajack]

Not sure if it's related to any of this but Apple apparently are going to be opening up an R&D facility in Kanata (west end Ottawa/Silicon Valley North).

Close to 25,000 sq ft.

[CanSpice]

Originally Posted by Acajack

Not sure if it's related to any of this but Apple apparently are going to be opening up an R&D facility in Kanata (west end Ottawa/Silicon Valley North).

Close to 25,000 sq ft.

It is related because the cost of employing someone is cheaper in Canada than it is in the US for US companies. Not only do they get a 40% discount on wages, healthcare's also included for free.

[mistercorporate]

Originally Posted by CanSpice

It is related because the cost of employing someone is cheaper in Canada than it is in the US for US companies. Not only do they get a 40% discount on wages, healthcare's also included for free.

Yep, happens all the time, there'll be more of this in the next couple years till the next recession. Good for Ottawa i say!

[MonctonRad]

The commodity crisis is more than just oil and gas. The potash mine in Sussex NB just closed, throwing about 450 people out of work. This is a big kick in the nuts for the NB economy. These jobs averaged nearly $100k per year and cannot be replaced.

[mistercorporate]

Perfectly normal, commodity economies are notoriously cyclical and fickle. Service economies only follow general economic cycles; layoffs of lazy or underqualified staff once a decade, 2 years of lean times, followed by relatively good times for the next 8 years for white collar positions.

[Beedok]

Originally Posted by Pinus

Or Manitoba, or New Brunswick, or......

True, but BC is 4.6 million people. That's more than Alberta or about the same as all the smaller provinces added up. If Ontario and Quebec are doing well that's ~2/3rds of Canada. If Quebec, Ontario, and BC are all doing well that's closer 3/4ers of Canada, which makes it even clearer that things are good. (Also Manitoba just seems to trudge along regardless.)

[logan5]

I'm no expert on economics, but it looks to me as if Vancouver is tailor made for a low dollar.

We've got a huge real estate industry that attracts offshore interests, which is now attracting U.S. interests. The real estate industry creates and sustains a large amount of construction jobs, realty jobs, etc.

The tourism industry, which was already doing alright, will surge starting in the spring. Bar and restaurants will be hopping.

The film industry had a record year last year, and is expected to meet or beat those record numbers when the film industries fiscal year ends in March. Those record numbers came with a dollar at around 90 cents. Now we're at less than 70 cents...

Related to the film industry is visual effects, which in the last few years has seen a lot of the major players setting up in Vancouver. Sony Imageworks moved their head office here from California, and we have tech companies like Microsoft, who set up a decent sized office in Pacific Centre.

There's doom and gloom on the nightly national newscast, but I think we're doing alright here in Vancouver.

[someone123]

Originally Posted by Acajack

This is not meant to be insensitive but Newfoundland is only 500k people out of 35M.

And keeping with the horse metaphor, it's hitched its wagon to oil way more than Alberta has.

Probably a non-starter, but this would be a good reason to consider an Atlantic merger. The big advantages would be in cutting down red tape and reducing the volatility of provincial budgets. The key to making such an arrangement work would be to make sure the right powers are devolved to regional entities within the new province. It's unlikely to happen, although I don't think a merger in the Maritimes is that far-fetched.

The 3-5% of GDP numbers for oil and gas are misleading. That may be the direct value of those industries, but if they were to disappear tomorrow the real loss to the economy would be much larger.

Here's a table of employment by industry in the Fort McMurray/Wood Buffalo area: http://www.choosewoodbuffalo.ca/reso...tre/workforce/

There are about as many people working in health care, education, and food services as there are working in forestry, fishing, mining, oil, and gas. The first group would likely not exist without the second or would shrink dramatically. Few would argue that Fort McMurray would remain a significant city without the forestry, mining, oil, and gas industries (Fort McMurray's marketing is often "we're not just oil and gas -- we have forestry and tourism too!").

The situation in Edmonton or Calgary is similar but to a lesser degree, and the same can be said for Canada. This isn't a 3% oil and gas country, it's a 10-20% oil and gas country. I don't think Alberta is going to sink into a giant crater but I do think there's a good chance that most people aren't really grokking the level of severity of the current economic situation. They definitely weren't back in the summer. A lot of people thought low oil prices would be a blip and then it would be back to things as usual in a few months.

[someone123]

Originally Posted by Acajack

Regarding Alberta and its GDP, it's actually forecast to post some modest growth in 2016.

The projections I have seen were based on the idea that oil hit a low last year and was going to rebound.

In mid-2015, people were saying that Alberta's economy would only grow by 1% or so in 2015, or that growth might be flat. By the end of the year, GDP growth clocked in at -1.2%. That was during a year when crude oil prices (WTI) averaged over $50 per barrel. They have since dropped to about half of that, below $27 a barrel. The price for oil futures for December 2016 is around $35 per barrel; investors do not seem to think that it's going to increase much over the next few months.

Unless the price recovers, I would guess that 2016 will be much worse than 2015, because oil prices will be much lower and the slump will have turned out to be much longer than many predicted, putting a damper on new investment.

[Acajack]

Originally Posted by someone123

The 3-5% of GDP numbers for oil and gas are misleading. That may be the direct value of those industries, but if they were to disappear tomorrow the real loss to the economy would be much larger.

Here's a table of employment by industry in the Fort McMurray/Wood Buffalo area: http://www.choosewoodbuffalo.ca/reso...tre/workforce/

There are about as many people working in health care, education, and food services as there are working in forestry, fishing, mining, oil, and gas. The first group would likely not exist without the second or would shrink dramatically. Few would argue that Fort McMurray would remain a significant city without the forestry, mining, oil, and gas industries (Fort McMurray's marketing is often "we're not just oil and gas -- we have forestry and tourism too!").

The situation in Edmonton or Calgary is similar but to a lesser degree, and the same can be said for Canada. T

his isn't a 3% oil and gas country, it's a 10-20% oil and gas country.

I don't think Alberta is going to sink into a giant crater but I do think there's a good chance that most people aren't really grokking the level of severity of the current economic situation. They definitely weren't back in the summer. A lot of people thought low oil prices would be a blip and then it would be back to things as usual in a few months.

That multiplier effect of oil and gas is hard to truly assess. I find that's huge, even though I don't want to minimize oil and gas' importance.

But consider that Norway's economy is 20% oil and gas officially. If you double that or multiply it by three, that means that without oil and gas Norway would have less going economically than Greece. That's extremely hard to believe.

[Hali87]

Originally Posted by Stryker

Again things like tourism and Manufacturing are hit hard by people with less money. This the stuff that makes no sense. Say what you want about oil workers that money goes right back into the economy. Tourism(bars' resturants etc, are the kinds of place that you can see this directly)

I can't speak for manufacturing here, but you're missing something re: tourism.

The oil workers' (or whoever's) money goes back into the Canadian economy via tourism, assuming that they only travel within Canada. If they take a trip to the US, or Cuba, or Mexico, or Europe, etc., then that money is leaving Canada and being spent in the US, or Cuba, or Mexico, or Europe. While some in the oil industry have probably been going on vacation elsewhere in Canada, I would wager quite a bit that this is not the majority.

When the dollar was high, there were added incentives to travel outside the country because A: it was cheaper to do so and B: the "same amount of money" could actually buy "more stuff" in countries whose currencies were weak compared to Canada's.

Conversely, if the CAD is low, then there is more incentive for people from other countries to come here and spend their money, because it's cheaper for them to get here and they can buy more stuff. More Canadians are also likely to take their vacations within Canada for the time being, because it's largely a rip-off for them to travel to/buy stuff in most other countries right now.

So I would predict this year, Canadian tourism hotspots will likely see both more Canadian visitors (who are discouraged from traveling/purchasing abroad, due to the low dollar) and international tourists (who can get a much better deal on traveling to Canada/buying stuff here compared to a year or two ago).



Edit: While I can see why you'd connect restaurants/bars with "tourism", I don't think this is what most people mean by "tourism". I would personally call that sector (along with hotels, etc) "hospitality", which is closely related to, but not the same thing as the much larger "tourism sector".

[mistercorporate]

Originally Posted by someone123

The projections I have seen were based on the idea that oil hit a low last year and was going to rebound.

In mid-2015, people were saying that Alberta's economy would only grow by 1% or so in 2015, or that growth might be flat. By the end of the year, GDP growth clocked in at -1.2%. That was during a year when crude oil prices (WTI) averaged over $50 per barrel. They have since dropped to about half of that, below $27 a barrel. The price for oil futures for December 2016 is around $35 per barrel; investors do not seem to think that it's going to increase much over the next few months.

Unless the price recovers, I would guess that 2016 will be much worse than 2015, because oil prices will be much lower and the slump will have turned out to be much longer than many predicted, putting a damper on new investment.

Late-2016 on will go down as one of the worst periods econmically in modern Alberta history. Thats when the real repercussions of last years price drop will kick in, 2017 will witness the blowback from 2016's low oil prices. The only thing stopping Alberta's economy from cratering right now is the pre-existing pipeline of projects from 2014.