Alberta Unemployment
A private conversation with a reader
Hope everyone had a great Thanksgiving.
Over the Thanksgiving long weekend, I had a great visit with a couple of our readers at their place.
Nothing beats great conversations over some wine and Scotch.
We talked about all sorts of topics.
One topic we chatted was about Alberta real estate, of course ;)
The wife mentioned they have a bit of investments in Alberta already and she was concerned about people leaving Alberta because they have a hard time finding jobs.
I'll share with you what I shared with her.
First, it's true a segment of the population aren't able to find jobs easily.
We see that in the increase of unemployment rate ticking up.
Source: Government of Alberta
Some people in online groups are commenting about their concerns of the higher unemployment rate as a precursor to the next down turn in Alberta real estate.
I understand where that thinking comes from.
Many had invested in Alberta years ago when the market suddenly turned.
Like a rug got pulled from under them.
It was painful.
I've heard from lots of investors having been scarred from it.
Once bitten twice shy.
It's natural to think:
Oh, the unemployment is ticking up, here we go again.
.
If we zoom out, we'll see what's happening is completely normal.
With the historic influx of people moving to Alberta in the past couple years, the jobs market are taking some time to adjust.
The increase in unemployment rate is a reflection of people moving to Alberta and not able to find a job, today.
The key word here is:
Today.
You see, jobs don't get created just because people move into a new area.
Jobs get created because businesses are growing and need more people to do the work in order to grow.
Jobs get created because government needs more people to maintain the level of service it's citizens are expecting from before.
Businesses hire more people to essentially... grow and make more.
Government and non-profit hire more to essentially... maintain it's service level*
I'm putting an asterisk * on Government's hiring as I'll come back to this later.
.
With a business, it means unless there's an opportunity for the business to make more income, it doesn't make sense for a business to hire more people.
With an influx of new people moving into Alberta, once they settled down, they will start to consume, spend more locally.
Everyone needs to eat, get around, wear clothing, go to movies, etc.
As these new Albertans spend more on things, the increase in demand will help a business justify hiring more people.
In a business owner's mind, if I can hire another person that will result me in making 20% more in profit, that's a good investment decision worth doing.
And that's exactly what will happen over the next few years.
It's like a snowball rolling down the hill, picking up momentum and get bigger and bigger over time.
The hiring will increase as more and more people moving to Alberta, that leads to the need to hire more people, brings down unemployment rate, creates more competition on labor, and drives up the wages.
That in turn, will attract even more people moving to Alberta.
.
Sounds great right?
Except, this takes time to play itself out.
It doesn't happen overnight.
It doesn't happen automatically.
It only happens when 1 thing leads to another.
Which starts with businesses making more profit and then needing more people to work.
Right now, we're in the awkward teenage "growing pain" phase.
We have all these new people moving to Alberta, yet we don't have more jobs ready for them.
That's why this drives up the housing prices and rent.
Simply because of the supply and demand imbalance.
Yet, it can be a bit challenging for the new Albertans.
Because it may take them longer to find a job.
And the truth is, some will leave.
The question an Alberta real estate investor should ask is this:
Where could they go?
Consider this:
The reason they moved to Alberta in the first place, is because they can't afford to live in Provinces such as Ontario and BC.
It's not like there's a good alternative.
.
Lastly, remember I put an asterisk on Government jobs?
Alberta is "notoriously" for being fiscal conservative compared with most other Provinces.
That means, just because we have an influx of new Albertans, the government is taking its time to increase its hiring.
Here's the thing, at some point, we can all except the Alberta Government to increase it's payroll.
Otherwise, we're going to see lots of angry Albertans complaining about the Government services getting degraded with the population increase.
Which has already happened in the area of health care and education.
It may not show up on polls yet, it will if it gets worse.
There's not too many guarantees in life, but there's one thing that's as close to a guarantee as the sun waking you the next morning, is that politicians will do whatever it takes to stay in power.
We will see more hiring from the Alberta Government in the coming years.
It's just what it does.
That'll be an exciting time when both private and public sectors are looking to hire more people.
.
Like I wrote in last week's newsletter, and starting to sound like a broken record:
Stay long my friends.
We're in this for a long ride.
Are you concerned about short term unemployment rate in Alberta?
Reply to this email and share with us
Eric Chang
Canmore, AB
October 15, 2024
Copyright © 2024 Why Alberta Now.
No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law.
The information provided herein is believed to be accurate and reliable, but Why Alberta Now does not guarantee its accuracy or completeness. The content is for informational purposes only and is not intended to be a substitute for professional financial advice. Why Alberta Now is not a financial advisor and does not provide personalized financial advice. The views and opinions expressed in this publication are those of the author and do not necessarily reflect the official policy or position of Why Alberta Now. The content may be subject to change without notice and may become outdated over time. Why Alberta Now is under no obligation to update or revise any information presented herein.
Investments involve risks, and individuals should consult with a qualified financial advisor before making any investment decisions. Prospective investors should carefully consider the investment objectives, risks, charges, and expenses of any investment before investing.