What Canada's economy would look like if Alberta's recession never happened

Off the top of your head, if you had to guess which politician said a "strong Alberta" means a "strong Canada," who would you pick?

If you said UCP Premier Jason Kenney, congratulations, you'd be right.

If you said former NDP premier Rachel Notley, well done. That's also correct.

Maybe your mind went to federal politics, though. No problem. If you said Michelle Rempel, the Conservative MP for Calgary Nose Hill, that is a correct answer, as well. So, too, is Kent Hehr, the Liberal MP for Calgary Centre.

Other correct answers include Calgary Mayor Naheed Nenshi, former B.C. premier Christy Clark and even former Ontario finance minister Dwight Duncan.

In this age of partisan talking points repeated ad infinitum, variations on the "strong Alberta, strong Canada" theme represent a rare turn of phrase that cuts across provinces, government jurisdictions and party lines. If you listen for it, you'll hear politicians of all stripes make the point, and with good reason. The evidence bears it out.

"There are very deep and important interconnections between Alberta's economy and the rest of the country," says University of Calgary economist Trevor Tombe, who recently completed a quantitative analysis on just that topic.

Just how deep are those connections? Think $130 billion — per year. Think a federal deficit that would be virtually wiped out. Think an unemployment rate that would have dropped to levels never before seen in this country.

This is what Canada missed out on, Tombe says, because of Alberta's latest recession.

'Significant impact on the national economy'

That recession, by most measures, started with the oil-price slump in late 2014 and lasted until late 2016. Alberta's economy then bounced back, to a degree, in 2017, but that recovery started to sputter in 2018.

Multiple economic forecasts for 2019 are pointing to another weak year, with the Conference Board of Canada saying a second, "mild recession" may even be in the cards for Alberta.

Tombe's peer-reviewed analysis, produced at CBC's request, was released today by the University of Calgary's School of Public Policy. It looks at how Canada's economy would have fared if Alberta's recent recession had never happened and, instead, the provincial economy had simply matched British Columbia's growth from 2014 to 2019.

The analysis builds on previous work from the school's Ron Kneebone, who in 2014 investigated the opposite: What Canada would have looked like if Alberta's economy, which had been previously booming, had instead grown at only a moderate pace.

In both cases, the results were stark.

"What these numbers show is that Alberta's recession had a very real and significant impact on the national economy," says Tombe.

In terms of sheer economic growth, he says Canada has missed out on roughly $130 billion per year, thanks to Alberta's recession.

And then there's the jobs.

Earlier this year, Canada's unemployment rate hit a historic low, dipping to 5.4 per cent in June. That's the lowest level recorded by Statistics Canada since it started tracking comparable data nearly a half-century ago.

If Alberta hadn't experienced its latest recession, however, Tombe's analysis suggests the national unemployment rate would be even lower today.

"I estimate Canada's national unemployment rate would be 4.9 per cent or 0.8 percentage points below its August 2019 rate of 5.7 per cent," he writes. "This is a significant drop."

And this, Tombe says, is not simply due to Alberta's unemployment rate declining in a hypothetical scenario where the recession never happened, thereby dragging down the national rate, on average.

To understand why, just consider the impact the actual recession had on workers beyond the province's borders.

"In 2014, 150,000 people worked in Alberta but lived somewhere else," he says. "So the job losses that we saw during the recession — at worst, 130,000 job losses — a lot of that was actually felt by workers who lived in provinces elsewhere. So the unemployment rate being higher nationally is not just because Alberta's unemployment rate is higher."

Then there are the broader economic effects.

Bigger trade flows, smaller deficits

A stronger Alberta economy means more trade between it and other provinces, something that also affects jobs.

Tombe says total internal trade within Canada was roughly $380 billion per year prior to the recession, and Alberta represented about $75 billion of that.

"So when a recession occurs here, that's going to mean fewer trade flows between Alberta and the rest of the country," he says. "And so that's another way in which businesses elsewhere can suffer because of a recession here."

All that trade also translates into tax revenue for the federal government. Tombe's analysis suggests the GDP boost that would have occurred if Alberta's recession had never happened would have resulted in an additional $13 billion flowing to the federal government in the fiscal year that just ended.

"The federal deficit was just a little bit over $14 billion," he says. "So this analysis suggests that almost all of the federal deficit for the prior year might be due to Alberta's recession."

Rhetoric vs. reality

To economists, this all might be obvious. The fact that economic growth in one part of the country comes with benefits for the country as a whole is not exactly a groundbreaking discovery in the field.

But Tombe worries recent political rhetoric that pits Alberta against B.C., or provincial governments against the federal government, or Western Canada against Central Canada, or pipeline supporters against pipeline opponents, obscures this reality.

"I think a lot of Canadians don't recognize just how closely and tightly interconnected provincial economies are," he says.

It's something that troubles Jim Dinning as well.

The former Calgary MLA, who served as provincial treasurer and in other cabinet roles in Alberta's Progressive Conservative governments of the 1980s and 1990s, believes too much of politics these days frames disagreements between regions as an either-or scenario, ignoring the common ground they all share.

"It shouldn't be Quebec or Alberta, or Ontario or the West. It's got to be Ontario, Quebec and a strong Western Canada," Dinning says.

"Really, every province in this country can be a contributor. And if one or two or three are left behind because of poor or bad or ill-thought public policy, that's a drag on the whole economy. And that's a tragedy."

There's a tendency in the public discourse, he says, to "talk past each other too much." Admitting Albertans are as guilty of it as anyone else — of "having a little too much swagger," especially during the boom times — Dinning believes Canadians across the country focus on narrow regional interests at the peril of the larger, national whole.

Tombe hopes his quantitative analysis will add weight to the political rhetoric discussed earlier: the "strong Alberta, strong Canada" language that we've heard, at various times, from UCP and NDP premiers alike, from Conservative and Liberal MPs, and from leaders at all levels of government.

This type of talk sometimes gets drowned out by more inflammatory kinds of political rhetoric, which tend to attract more attention for their bombast, but Tombe believes it's important to hear.

"I think this does speak to national unity considerations that are not often talked about," he says.

"The economic health of one region affects the economic health of all."

West of Centre is an election-focused pop-up bureau based out of CBC Calgary that features election news and analysis with a western voice and perspective.