Oil Price Plunge Pulling Calgary's Housing Market Down With It
The Alberta government expects the unemployment rate to rise to 5.4 percent in 2015 from 4.7 percent in 2014, while the Canadian Association of Oilwell Drilling Contractors warned in January 23,000 jobs could be lost as a result of decreased drilling activity alone.
CIBC World Markets economist Nick Exarhos expects around 30,000 to 40,000 jobs to disappear in Alberta this year, a figure echoed by the Alberta Treasury Board and Finance Ministry, and the province's unemployment rate to converge with the national average around 6.8 percent.
In Calgary alone there are 1,700 energy businesses and between 70,000 and 75,000 people working directly in the oil and gas industry, according to the city's Chamber of Commerce.
That organization estimates 10,000 to 12,000 of those jobs could be at risk due to the oil price drop, and those numbers do not include sectors linked indirectly to the energy industry, such as finance and infrastructure.
Among the companies headquartered in Calgary, Suncor Energy and Precision Drilling Corp have already cut employees as well as contractors.
"If we start to see full-time job losses and people cannot replace those jobs, that's when it really starts to have downward pressure on the housing market," Calgary Real Estate Board Chief Economist Ann-Marie Lurie said.
It all comes down to oil. The price for benchmark U.S. crude oil has dropped to just over $50 a barrel from more than $100 in June. If it remains around $50 or falls further, as some economists have warned it could, house prices are likely to slump further.
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