BY MARIO TONEGUZZI, CALGARY HERALD JANUARY 13, 2011

CALGARY - The road out of the recession has been an uphill but by no means steady climb for Calgary's economy.

And "depressed natural gas prices and the laggard economy in the United States" will continue to be a drag on the city's recovery, says Calgary Economic Development's State of the Economy semi-annual review, released in partnership with the Herald.

But oil prices recovering to pre-recessionary levels, strong recent indicators of foreign direct investment and commercial real estate absorption rates are positive factors that will boost the economy.

"Calgary can expect a more sustainable level of economic activity in 2011," says the report. "In 2011 and beyond, the City of Calgary forecasts that a combination of moderate employment growth, commensurate labour income growth and increased consumer confidence will drive increases in gross domestic product in the region of 3.3 per cent in 2011."

In 2010, Calgary's estimated GDP growth was 3.5 per cent following a decline of 4.7 per cent in 2009. The city's economic growth peaked in 2006 at 7.6 per cent after 5.8 per cent annual growth in both 2004 and 2005.

Bruce Graham, president and CEO of Calgary Economic Development, says the city's economic growth this year will be at or near the top in the country.

"In comparison to the real heady days of 2006 and 2007, it's going to look a lot milder, but it's also more sustainable and it's a reflection we're coming out of a difficult economic period and there's going to be in all likelihood a few more bumps along the way," said Graham.

"Reflecting back, I think the recession was felt pretty significantly here in Calgary . . . In 2009 and 2010, we saw a firming up and an increase in oil prices and that part of the energy sector has shown optimism and a commitment to capital projects and that's starting to wind its way through the economy in Calgary and across Alberta."

In a report last fall, the Conference Board of Canada said Calgary is set to take back its spot as the nation's leader in economic growth, with the city becoming Canada's growth leader from 2011 to 2014.

In 2011, economic output in Calgary is expected to grow by 3.8 per cent, according to the conference board, with GDP growth above four per cent for the following three years.

On Wednesday, BMO Capital Markets released a report by senior economist Michael Gregory and economist Robert Kavcic that predicted GDP growth in Alberta of 3.5 per cent this year and 3.4 per cent in 2012.

"Alberta's energy sector has re-awakened from recession and likely fuelled 3.6 per cent real GDP growth in the province in 2010," says the report. "The next few years should also see above-average growth but the province is still a long way from the capacity constraints of the commodity boom -- as a result, an immediate return to a sub-four per cent jobless rate, lofty wage growth and rampant housing starts is unlikely."

But the report says "resurgent" oil prices have improved the economics in the energy sector and activity in Alberta is gathering momentum. Also on Wednesday, a report by CIBC World Markets said the recent rebound in Canadian manufacturing has seen the country's 25 largest cities regain all the economic ground lost in the recession.

Graham says the activity in the oil and gas industry is often a leading indicator of what we'll see on the labour front. And the CED report says the Calgary region can expect an unemployment rate of between 5.2 per cent and 6.2 per cent in 2011.

"I think what is reinforcing some more optimism or some uptake in labour is capital projects are increasing," he said.

"That, coupled with the evidence we're seeing in office leasing activity . . . would indicate we'll see further reductions in unemployment."

But the report also says Calgary's labour market continues to show signs of struggle.

"While signs of economic recovery may be on the radar for some companies, they are reluctant to hire in an environment of uncertainty," says the report. "We continue to hear some reports of layoffs while few companies indicate they are looking to bring on large numbers of full-time staff, instead looking to secure part-time or contract based staff."

According to Alberta Employment and Immigration, Calgary's unemployment rate in December was 6.0 per cent, down from 6.1 per cent in November and 7.2 per cent in December 2009.