Natural resources sector suffers `steepest decline ever' in Q2, StatCan says

Employment collapses to record 7.3% with energy feeling brunt of job losses

CALGARY Canada recorded its largest-ever drop in natural resources employment in the second quarter, as the COVID -19 pandemic caused commodity prices to plummet and close to 43,000 workers lost their jobs.

In a release Wednesday, Statistics Canada reported that employment in the natural resources sector fell 7.3 per cent, which is “the steepest decline ever recorded” as “low natural resource prices contributed to broad-based job losses.”

Statistics Canada also reported the resource sector's contribution to the country's gross domestic product declined, while exports fell 9.3 per cent due to a collapse in commodity prices.

While the implosion of oil prices, to minus US$37 per barrel in the second quarter, captured attention, demand for other natural resources, such as lumber, also led to weakening commodity prices and job losses in those subsectors.

The energy industry felt the brunt of the job losses, with 23,600 workers losing their jobs, followed by 11,850 jobs lost in the mining and minerals industry. A further 6,100 jobs were lost in the forestry sector and 1,400 jobs were lost in hunting, fishing and water industries. Altogether, there were 42,950 people out of work in those natural resources businesses in the second quarter.

As the price of oil and refined products like gasoline fell between April and June, so too did the broader natural resource sector's contribution to the Canadian economy and to exports.

“Canada has long been a net exporter of natural resources — export values are generally about double those of imports,” the agency reported.

StatCan data shows natural resources represented about 8.4 per cent of the country's nominal GDP in the second quarter, which is down 9.5 per cent from the first quarter. This was the sharpest quarter-over-quarter decrease since the agency first started reporting quarterly data in 2007.

“A 10.1 per cent decline in the energy subsector was mainly attributable to a substantial drop in demand for crude oil and refined petroleum products. Demand fell largely because of global travel restrictions and the growing prevalence of working and schooling at home,” the agency said, noting that the mining sector contracted 14.2 per cent in the second quarter.

A recent report by Calgary-based ARC Energy Institute notes that reinvestment in the oil and gas sector will fall to $9.5 billion this year, compared to $25.3 billion in 2019 — a 64-per-cent drop. The institute expects the sector's revenues to reach $69.3 billion this year, a 42.6-per-cent fall from last year.

The Canadian Association of Petroleum Producers (CAPP) has urged the feds to offer accelerated depreciation of capital facilities to the oil and gas sector. That includes introducing 100-per-cent immediate deductibility for oil and natural gas capital investments. It also wants the government to reinstate the Atlantic Investment Tax Credit (AITC) at 15 per cent in short term, moving to 10 per cent in the long term.