Slumping Canadian Economy Impacting the NHL

Talk to any economist worth his or her abacus, and he or she will tell you that Canada’s economy will almost always mimic the economy of the United States. If we’re having boom times, chances are Canucks will be living it up as well. That’s not the case right now, with Canada’s economy taking a serious dive due to falling oil prices and a weak dollar. The “Loonie,” as it’s affectionately known, has lost considerable ground to the U.S. dollar, something it hasn’t done in over a decade. A weak Loonie has a laundry list of positive and negative aspects for Canadians, and if you happen to be an NHL hockey fan, it affects you, too.

On a Saturday night in January, when the Hockey Night in Canada game features the Montreal Canadiens taking on the Maple Leafs in Toronto, you would think I’d be singing the praises of one of sports’ most exciting rivalries. With the Habs struggling without star goaltender Carey Price and Leafs, well, the Leafs are cruising through yet another losing season, there’s very little reason for excitement. Habs G.M. Marc Bergevin held a press conference recently that could only be described as an apology to the fans. Leafs G.M. Lou Lamoriello is likely wishing he could be sitting on a beach in Miami, instead of trying to fish the team out of the basement of the Atlantic Division.

For the past decade or so, ground zero of the Canadian economy has been a little Alberta town north of Edmonton named Fort McMurray, where the Athabasca oil sands are located. The bitumen deposits in that geographic location have the ability to keep the world consuming fossil fuels for generations to come, but the toll extracting crude oil from bitumen is crippling the environment. Moreover, refining that oil is much more expensive than refining liquid crude, and low oil prices make that process untenable. A barrel of oil has to be closer to the neighborhood of $50-$60 than $30 for it to be profitable. So while we enjoy pumping cheap gas into our cars, thousands of people who were making serious bank because of the oil sands now find themselves unemployed. Former Conservative Prime Minister Stephen Harper spent the better part of a decade propping up the Canadian economy with the oil sands, but now that the price of oil is falling through the floor, Canada is struggling.

What does all this have to do with hockey? The impact of a struggling economy has a unique impact on the NHL. A weak Loonie means that expenses go up by about 40 percent since all the players on the seven Canadian teams get paid in U.S. dollars. Team revenues are in Canadian dollars, so when the two currencies were on par with each other, no one complained. Now that there’s a growing disparity, players on Canadian teams are enjoying making more money without having to lift a finger to re-negotiate their contracts. This is bad news for the league because decreased revenues not only impact the salary cap, they affect all the hard working people employed by each team. The more these organizations lay out in player salaries, the more likely there will be layoffs in the front office. The players say they feel bad and are cheering for the dollar to rebound, but that won’t be happening anytime soon.

All the economists I’ve been listening to say that oil prices and the Loonie will stay low for the foreseeable future. Current Prime Minister Justin Trudeau is said to have a few economic stimuli up his sleeve, but we won’t know what they are until Parliament reconvenes this week. In the meantime, the only person I can think of who is grinning and giggling evilly at the fate of the Canadian teams is NHL commissioner Gary Bettman. I can’t prove that, of course, but my intuition tells me that when talk of expansion heats up again, he’ll be looking for ways to add two more teams in the U.S. rather than ride out this recession and award Canada an eighth franchise (in Quebec City).

If I didn’t know what I know about Canada, economics, and sports, I’d probably be watching the Habs-Leafs in blissful ignorance. I’d be grumbling about Dion Phaneuf and his crappy attitude, and rooting for Nazem Kadri to finally have that breakout season everyone has been patiently waiting for. But the curses of knowledge, age and dual citizenship have me all twisted up inside. I’ve seen all this before, but the older I get, the more I worry.

Hockey, for many people in North America, is not a means to an end like it can be in football. It is a way of life completely antithetical to the Sunday games and the obnoxious marketing machine. The NFL manages to steamroll its way through recessions, labor disputes, and atrocious behavior on the part of some of its players. The league seems to land on its feet regardless. It’s never been that easy for the NHL. This isn’t the first time economics have placed the league in peril, and I’m certain it will not be the last.

2 Replies to “Slumping Canadian Economy Impacting the NHL”

  1. As you rightly point out, the falling Canadian dollar was at the forefront of the 04-05 lockout. The owners could do something then since there was no CBA in place. Now? Who knows? A stagnant cap and an increase in escrow would be a start. But you have to wonder, especially when it comes to free agency. Does this jeopardize Stamkos to the Leafs? I’d say it would. Good perspective, Nava.

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