Construction and Maintenance Looking Forward

1. Construction and MaintenanceLooking Forward Alberta An Assessment of Construction Labour Markets from 2014–2023

2. Construction and Maintenance Looking ForwardAlberta Contents • Introduction and highlights • Economic environment and investment outlook • Construction labour requirements • The available workforce • Market rankings and mobility • Conclusion Note: Definitions, methodology and detailed tables are available at www.constructionforecasts.ca.

3. Introduction Construction and Maintenance Looking Forward 2014–2023 • Reports on the state of construction labour markets in Alberta from 2014 to 2023 are based on: • a current macroeconomic and demographic scenario • scenario for construction and maintenance spending in residential and non-residential sectors • a current inventory of major construction projects • the views and input of provincial labour market information (LMI) committees • The BuildForce labour market model covers 33 trades and occupations: “The BuildForce construction workforce.” • This group includes on-site workers – 75 percent of the full construction workforce. • Statistical reliability is limited by small populations in some provinces, but in Alberta, all 33 trades and occupations are covered.

4. Highlights Recent cycle: 2007–2012 • By 2007, employment had almost doubled its historical levels. • Job losses in 2009 marked an abrupt interruption to the accelerating growth in Alberta construction employment that began in 1997. • More than 10 years of accelerating growth had reduced unemployment to record low levels and recruiting from outside of Alberta became standard procedure. • From 2007 to 2009, employment declined by 13percent, but then recovered by 20 percent between 2009 and 2012. • Since 2009, unemployment had approached more normal levels, but remained below historical values and recruiting from out of the province had resumed. • A rising proportion of the arriving workforce were “non-resident” employees (i.e., not permanent residents).

5. Highlights 2013 • Growth continued in 2013, but at slower rates: • housing, commercial and industrial activity was rising • some major engineering projects were winding down • Employment was up – mostly in residential – with total gains below recent annual averages. • Unemployment remained very low and out-of-province recruiting continued. • Calgary floods set up late-year shifts in activity with large emerging requirements.

6. Highlights 2014–2023 • Project announcements and flood damage add to the demand requirements into 2014 and 2015. • A residential cycle causes home building to weaken from 2016 to 2019. • Oil sands projects lead a surge in non-residential investment from 2014 to 2019. • As the oil sands industry matures and capacity grows larger, employment shifts from new capital projects to increased ongoing maintenance work and sustaining capital projectsover the long term. • Housing revives and oil sands work eases off after 2020. • There are very limited opportunities for local workforce mobility within the province. • Recruiting from out of the province continues near record levels until 2020 and in-mobility is divided between non-resident employment and permanent additions to the workforce.

7. Economic environment Canada • Canada’s economic growth is forecast to be relatively stable over the next 10 years, averaging 2.2 percent annual growth. • Strong private investment will remain instrumental to the country’s growth, as relatively lower commodity prices and sluggish economic recovery across Canada and the rest of the world constrains growth. • The attempts of the federal and provincial governments to reduce their deficits will slow government spending. • Short and long-term interest rates remained low in 2013, reflecting the need to keep the recovery going, but are expected to rise subsequently as the Federal Reserve Board and the Bank of Canada react to potential higher inflation. • The Canada-U.S. exchange rate is expected to remain strong in the short term, but fall toward its underlying value over the scenario period.

8. Canada and U.S. 3-month treasury bill rates (%)

9. Economic environment The rest of the world • The speed of recovery for developing and emerging economies is expected to outpace that of the developed ones over the medium term, despite a slowdown in growth. • Over the longer term, growth in the developed economies will remain below that of developing ones as a result of slower population growth and the fiscal constraint associated with the need to reduce large government deficits. • Canada’s largest trading partners include the United States, Europe and Japan. As a result, export demand is expected to grow in line with economic growth in the advanced economies. • The outlook for major trading partners is weaker in the short term, due to consumer and government austerity and policy uncertainty. • There is expected to be improvement in the medium to long term, with deficit and debt reduction leading to increased business and consumer confidence.

10. Economic environment Commodities: oil and gas • In the short term, real commodity prices are expected to remain weak, but relatively high in historical terms. • Subsequently, prices are expected to increase over the forecast period: • Oil prices, as measured by the WTI at Cushing, are assumed to exceed their previous peak of about US$100 per barrel in 2017, while those for natural gas as measured at the Henry Hub are not expected to return to their previous peak. • The relatively weak performance of natural gas reflects the large increases in the amount of gas that is expected to be obtained from shale gas deposits across North America.

11. Oil and gas pricesNominal US$ (see relevant y-axis)

12. Economic environment Commodities: metals and minerals • Prices for metals and minerals are expected to weaken in the short term as a result of weak global growth prospects. • While prices are assumed to increase over the long term, the increases will be much smaller than those observed over the past few years. • The outlook for base metals is largely influenced by the outlook for China’s economy and the intensity of metals in overall production in its economy. Growth in the Chinese economy is expected to continue, but the intensity of metal use is expected to decline as the economy diversifies, moving from goods toward services. • Real prices for precious metals are expected to decline as (i) institutional investors increasingly consider them less attractive “safe haven” alternatives and (ii) due to weakening physical demand for them.

13. Metals and minerals prices(Index 2007=100)

14. Housing starts and household formation* * Household formation refers to the change in the number of households (persons living under one roof or occupying a separate housing unit) from one year to the next. It is the means by which population growth is transformed into demand for new housing.

15. Residential construction investment$2007 millions* * $2007 millions indicates that the investment values are in year 2007 dollars (base year), that is, adjusted for inflation. This is used to calculate the real physical year-to-year change of the value of construction, factoring out growth (increase value) due to increases in prices.

16. Residential construction labour requirements Residential construction employment • Spending related to flood damage drives up activity late in 2013 and into 2014. • Flood-related work builds a cycle into renovation spending, as work is concentrated in 2013 and 2014. • There is a moderate housing cycle; turning down in 2016 and up in 2019. • Residential construction employment grows by just under 6,500 jobs (14 percent) from 2014 to 2023.

17. Residential construction labour requirements Residential construction employment • Trades and occupations most impacted by the new housing cycle include: • construction managers • sheet metal workers • tilesetters • trades helpers and labourers

18. Residential construction employment indexSelected trades (Index 2009=100)

19. Residential construction labour requirements Residential construction employment • Trades and occupations most impacted by renovations activity and flood damage work include: • floor covering installers • refrigeration and air conditioning mechanics • residential and commercial installers and servicers* • residential home builders and renovators • roofers and shinglers * Residential and commercial installers install and service a wide variety of interior and exterior prefabricated products such as windows, doors, electrical appliances, water heaters, fences, play structures and septic systems at residential or commercial properties. Example titles: aluminum window installer, eavestrough installer, electric appliance installer, exterior cladder, fence erector, hot tub installer, kitchen cupboard and vanity installer, recreation structure erector, siding installer, sign installer, swimming pool installer, water conditioner servicer, water heater servicer, window installer.

20. Residential construction employment indexSelected trades (Index 2009=100)

21. Non-residential construction investment $2007 millions* * $2007 millions indicates that the investment values are in year 2007 dollars (base year), that is, adjusted for inflation. This is used to calculate the real physical year-to-year change of the value of construction, factoring out growth (increase value) due to increases in prices.

22. Building construction investment$2007 millions* * $2007 millions indicates that the investment values are in year 2007 dollars (base year), that is, adjusted for inflation. This is used to calculate the real physical year-to-year change of the value of construction, factoring out growth (increase value) due to increases in prices.

23. Non-residential construction labourrequirements Non-residential building • There is a late-2013 and 2014 surge in commercial, institutional and industrial work related to the flood. • Activity switches back to new building construction from 2015 to 2023 with: • a short-term drop in 2015 as flood work ends • steady growth as the Alberta economy grows from 2016 to 2023 • Labour requirements for ICI (industrial, commercial and institutional) work grow more slowly than engineering and resource work from 2016 to 2019 and then provide a steady increase in jobs from 2020 to 2023.

24. Engineering construction investment$2007 millions* (see relevant y-axis) * $2007 millions indicates that the investment values are in year 2007 dollars (base year), that is, adjusted for inflation. This is used to calculate the real physical year-to-year change of the value of construction, factoring out growth (increase value) due to increases in prices.

25. Non-residential construction labourrequirements Major engineering and industrial projects • Many large engineering projects are underway and ending in 2013-2014. • Major projects (excluding oil sands) starting up include: • flood repair (roads, bridges) ending in 2014 • electrical generation and transmission (renewable and conventional) • pipelines (including Energy East) • Oil sands projects include: • in-situ projects scheduled to start up in 2015-2016 and then build toward a peak in 2019 • Fort Hills starts in 2014 • As the oil sands industry matures and capacity grows larger, employment shifts from new capital projects to increased ongoing maintenance work and sustaining capital projectsover the long term.

26. Non-residential construction labourrequirements Major engineering and industrial projects • Oil sands projects dominate employment demands for: • boilermakers • carpenters (scaffolding) • construction managers • contractors and supervisors • crane operators • Electricians • Heavy equipment operators and mechanics • insulators • ironworkers (structural and reinforcing) • sheet metal workers • steamfitters and pipefitters • trades helpers and labourers • welders

27. Non-residential construction employment indexSelected trades (Index 2009=100)

28. Construction labour requirements

29. The available workforce Unemployment • Unemployment in 2014 is heading down and approaches the record low set in 2007. • There is virtually no pool of local labour available for recruiting. • Demographic limits on the younger population grows across the scenario period. • Both natural and actual unemployment decline into the future.

30. The available workforce Replacement demand* and mobility • The supply of skilled labour must be recruited from outside the local markets. • Requirements in Alberta for BuildForce trades and occupations are rising in related industries, including fabrication. • Recruiting will come from out of the province, including: • non-resident employment (inter-provincial employment and temporary foreign workers) • permanent in-migration • The distribution of in-migration varies by labour requirements. For instance: • oil sands and other resource work draws on non-resident employment • replacement demands require permanent in-migration * Replacement demand refers to the loss of workers due to retirement and mortality.

31. The available workforce Mobility • From 2014 to 2023: • the labour force increases by 38,000 • replacement demands (retirements + mortality) increase by 37,500 • new entrants into the construction workforce (aged 30 and younger) are approximately 30,000 • the construction industry will need to recruit around 45,500 workers from other industries (i.e., in-mobility)

32. The available workforce Mobility • Most of these 45,500 in-migrants will be needed permanently to replace workforce losses. • A balance of labour requirements will be filled with non-residents. • This pattern of adjustment is not evenly distributed across the scenario, with • recruiting of non-residents focused on the timing of oils sands projects • permanent in-migration needed across the entire scenario for growing maintenance and sustaining capital work

33. The available workforce

34. Labour market rankings

35. Labour market rankings:Alberta – overall

36. Labour market rankings:Alberta – overall (continued)

37. Alberta oil sands

38. Oil sands highlights Projects and schedules • The Fort Hills project increases requirements in 2014 and 2015. • A long list of in-situ projects are anticipated from 2016 to 2019, with a notable pause in growth in 2018 and acceleration in 2019. • Associated demands for construction of electricity and pipeline infrastructure is included in other non-residential activity. • Rankings for oil sands markets are focused on the annual increase in labour requirements. • There is evidence of a very high proportion of non-resident employment (i.e., fly-in, fly-out).

39. CAPP oil sands production (000s BBL/Day)

40. Oil sands construction employment indexSelected trades (Index 2009=100)

41. Oil sands construction employment indexSelected trades (Index 2009=100) 43,000 jobs added 2009–2019 23,000 jobs added 2014–2019

42. Labour market rankings: Alberta oil sands

43. Labour market rankings: Alberta oil sands (continued)

44. The available workforce Mobility • Rankings are intended to capture market conditions unique to Alberta. • Implied mobility signals Alberta requirements, not the available workforce in other provinces. • Engineering and resource project demands in other provinces dominate this analysis. • The strongest competing demands for key trades will come from British Columbia, where mining, electricity, pipeline and LNG* projects start from 2015 to 2018. • Projects are scheduled to wind down in Newfoundland and Labrador in 2015, with variable conditions in Saskatchewan from 2015 to 2020 and in Ontario across the scenario period. * Liquefied natural gas

45. The available workforce Mobility (centres of resource construction) • Major projects in rural or remote areas require a specialized workforce, including: • boilermakers • construction managers and estimators • construction millwrights crane operators • electricians • heavy-duty equipment mechanics • plumbers • steamfitters and pipefitters • welders

46. Labour market hot spots

47. Our thanks to … The production of Construction and Maintenance Looking Forward 2014−2023 would not have been possible without the valuable input from the following organizations: • Alberta Advanced Education and Technology • Alberta Construction Association • Alberta Employment and Immigration • Alberta Finance and Enterprise • Alberta Roadbuilders and Heavy Construction Association • Building Trades of Alberta • Canada Mortgage and Housing Corporation • Canadian Home Builders’ Association – Alberta • Canadian Natural Resources Limited • Christian Labour Association of Canada • Construction Labour Relations – Alberta • Enbridge Inc. • Merit Contractors Association • Nexen Inc. • Progressive Contractors Association of Canada • Service Canada • Syncrude Canada Ltd.

48. About BuildForce Canada Originally created in 2001 as the Construction Sector Council, BuildForce Canada is a national industry-led organization committed to working with the construction industry to provide information and resources to assist with its management of workforce requirements. Like many industries, the construction industry faces a number of human resource challenges. These include the need to accurately forecast labour demand and supply, to increase the mobility of workers, to make the most of new technologies, and to cope with an aging workforce. This report is part of BuildForce Canada’s Labour Market Information Program. It is also available in both official languages and can be obtained electronically at www.constructionforecasts.ca.

49. For more information, contact: BuildForce Canada Phone: 613-569-5552 info@buildforce.ca February 2014