5 signs of trouble for Saskatchewan's economy in oil slump
Many said province could withstand economic blows from oil and gas, but there are troubling signs
When crude oil prices began to plummet, economists comforted Saskatchewan residents that their diversified economy would safeguard them during the oil and gas slump.
In fact, Saskatchewan's economy isn't that diverse.
The province relies heavily on natural resources: fuel, food and fertilizer.
And while economists were banking on the agriculture and potash industries to offset energy losses, they're no longer confident that will happen.
The potash industry remains strong in production, on par with its growth last year, but nitrogen prices have fallen about $60 US a tonne.
Most worrisome, it's shaping up to be a disappointing crop year for many Saskatchewan farmers, thanks to an unwelcome mixture of spring frost, drought and poorly timed rains.
While cattle prices remain high, drought has jeopardized hay yields and could force some ranchers to sell off their herd.
The Bank of Montreal has already downgraded its growth projection for Saskatchewan this year from one per cent to half a per cent.
"It's disappointing," chief economist at the Bank of Montreal, Douglas Porter, said. "The likelihood of a pretty tough crop this year further dims the outlook for western Canada."
The Royal Bank of Canada told CBC News it expects to downgrade its growth projection next month as well.
Premier Brad Wall says he's still confident the province can overcome economic pressures, and points to his government's four-year plan to spend $5.8 billion on infrastructure.
Still, there are already red flags for the economy. Here are five signs of trouble:
1. Housing sales
The honeymoon is over for Saskatchewan's housing boom.
The Canadian Real Estate Association predicts house sales in Saskatchewan will decline by nearly 13 per cent this year.
That's both an indicator of low consumer confidence and an ominous sign for the construction industry.
Housing starts in the first quarter of 2015 are half what they were three years ago.
There's already a glut of houses for sale in Regina and they're overvalued, according to the Canada Mortgage and Housing Corporation.
2. Retail sales
Saskatchewan was the worst performer in the country for retail sales, declining by 2.6 per cent in the past year, according to the National Bank of Canada.
In May 2015, when every other province saw their retail sales rebound slightly, only Saskatchewan experienced another drop.
3. Manufacturing
Thirty-five hundred people have lost manufacturing jobs in Saskatchewan over the past year.
In a relatively small sector, that's a significant job loss — more than 10 per cent.
Saskatchewan manufacturers cater mostly to domestic customers in the oil, agriculture and potash industries. However, economists had hoped that the weak Canadian dollar and strong U.S. economy would boost export demand.
"We've generally been disappointed in terms of the numbers through the first half of the year," Paul Ferley, assistant chief economist at the Royal Bank of Canada, said.
Even the potash industry isn't fuelling sales, as several mining companies are winding down capital projects and phasing into mine maintenance.
"The sky isn't falling," executive director of Saskatchewan Manufacturing Council, Derek Lothian, said.
While he's worried a poor crop year will hurt farm equipment sales, Lothian points out that province's manufacturing industry has grown exponentially over the past decade.
4. Unemployment rate
The provincial government continues to boast that Saskatchewan has the lowest unemployment rate of any province in Canada.
Yet, Saskatchewan's unemployment rate was 4.7 per cent in June 2015, up from 3.7 per cent a year ago.
The chief economist for Bank of Montreal points out that's not good.
"The unemployment rate is up about a percentage point since the end of 2014 and that's a relatively steep climb for the province, given that nationally we've only seen unemployment go up a few tenths of a per cent," Porter said.
5. Vacancy rate
Cities that cater to the oilpatch have "Apartment For Rent" signs everywhere.
The apartment vacancy rate in Estevan has spiked to 20 per cent, and vacancies in Lloydminster and Weyburn have increased fourfold to 11.6 and eight per cent, respectively.
While a glut of new condos has contributed to this, Canada Mortgage and Housing Corporation also attributes the changing rental market to fewer migrants.
That is a worrisome trend, according to Rose Olfert, public policy analyst at the Johnson-Shoyama Graduate School in Saskatoon.
"The rapidly growing economy was pulling in more and more people. The reversal of that will be an indication that the economy is slowing down and people leaving the province."
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