AEDC’s crystal ball sees light at the end of recession tunnel

Alaska’s recession is bottoming out, Anchorage Economic Development Corp. says. Job losses are slowing. Some key industries, like oil and gas, are leveling out. Housing markets are stable, bankruptcies are at normal levels, and they’re even down for businesses.

Anchorage lost 2,100 jobs last year, but AEDC had predicted 2,400 jobs lost. The prediction is for employment to be down another 1,000 in 2018. But unemployment is low, particularly in Anchorage.

Things could be worse.

That’s the overall assessment by AEDC. presented by its CEO, Bill Popp, at the business group’s Feb. 1 economic forecast.

What happens in Anchorage’s economy is important to Matanuska-Susitna Borough communities, because so many Mat-Su people commute to jobs in Anchorage. “Thirty seven thousand people who live in the (Mat-Su) valley get their paychecks at jobs in Anchorage,” Popp said. That comes from U.S. Internal Revenue Service data.

AEDC’s annual forecast is a sell-out event with over 1,500 of Anchorage’s business and community leaders packed into the downtown Dena’ina Center’s biggest meeting room.

Popp peeled off a number of data points showing the local community still losing jobs, but at a slower rate, but also with business and community confidence ticking up a little because of higher oil prices and good news from the North Slope, where oil production is slightly up, along with strong health care employment, summer tourism and a stable outlook for key industries like transportation, which includes air cargo at Anchorage’s Ted Stevens International Airport.

“But aside from oil, transportation, and health care, everything else is still down,” with the outlook for continued declines in 2019, Popp said.

Ironically, the low unemployment rate actually signals a tight job market, Popp said. “We’re at or above full employment in Anchorage,” he said. In surveys for AEDC employers even report difficulty in finding skilled workers in some fields.

That is another effect of the recession, however, because it is a result of workers in skilled occupations relocating to the Lower 48 states where the economy is strong. Anchorage is losing population, too. “This is an effect of the recession,” Popp said. AEDC’s forecast is for Anchorage to lose 1,500 people in 2018, or about 0.5 percent of its population. Last year, 2017, saw a similar decline, Popp said.

Among the bright spots is health care, which has been increasing its employment for several years and which AEDC expects to gain another 800 jobs in 2018, Popp said. Fifty three percent of the state’s health care workers live in Anchorage, he said.

Oil and gas is expected to be stable this year, due to increased activity on the North Slope and gradually rising oil prices. “It won’t grow, but we’ll stop the decline,” Popp said. Petroleum jobs are important because these are the highest-paid workers in the state.

Of other industries, AEDC expects retail to continue shedding jobs and to remain soft. However, “The closures of Sears the Sam’s Clubs are related to national corporate restructuring and not the local recession,” Popp said. Softness in retail is mainly a result of less spending in the regional economy because of losses in higher-paying jobs, like oil and state government.

A myth Popp wants to lay to rest, he said, was that the cuts in the Permanent Fund dividend over the last two years have hurt retail. “We did not see any effect of this in the local retail sector,” Popp said. “Many people save their dividends or use it to pay basic expenses,” Popp said.

The PFD is not a big driver in Anchorage’s $1.1 billion retail sector, he said. Even at its reduced level the annual PFD injects $600 million into the state’s economy.

There are challenges beyond the recession, however. Three areas of concern pop up. Businesses are most concerned about the state’s financial condition and the Legislature’s inability to adopt a fiscal plan, Popp said. Eighty seven percent of respondents to a survey of business leaders ranked this as their highest concern.

Concerns for health care costs and the need to stem oil production declines on the North Slope were also ranked high, by 78 percent of respondents.

In addition to straight economic metrics AEDC tracks quality of living, mainly through surveys.

Three other concerns were voiced here, including tight housing, which is surprising in a recession, as well as high health care costs and high rates of property crimes believed to be related to the opioid epidemic.

Anchorage took a big drop this year in on surprising area, a “play” index that measures rankings in recreation, arts and culture, qualities employers see as important in recruiting and retaining skilled workers and professionals. In fact, the community dropped from 12 to 20 in the “play” ranking compared with other cities of similar size.

“What surprised us about this was that it wasn’t the ‘outdoor’ rankings, where we are still strong, but the ‘indoor’ opportunities, like arts and culture. We put this down to fewer people working in the arts and creative fields,” which have an effect on events and other activities.

Business and consumer confidence seems to be increasing according to AEDC’s surveys, Popp said. The overall business confidence index, a composite of responses to various questions like plans for hiring, was 51.3 out of a possible 100 in January, but this shows improvement over 50.1 percent in the same month of 2017 and 48.8 in January 2016.

In terms of specific industries, oil and gas is expected to remain steady at about 2,700 jobs in Anchorage in 2018, the same as 2017. Petroleum employment is down about 1,200 since 2015, before oil prices dropped.

Professional and business service jobs have also been hit by the recession, dropping from 19,615 employed in Anchorage in 2015 to 17,600 in 2017 and an expected 17,400 in 2018. The industry has been hit because many professional workers, like engineers, do work for oil companies or oil service companies.

Construction has also declined, a consequence of the cutback in state construction spending as well as oil industry cuts. In 2015 there were 8,303 at work in construction in Anchorage. In 2018 that is expected to be 6,800.

Leisure and hospitality, an industry boosted by summer tourism, is also down, though slightly, because of the soft off-season between the visitor seasons. The decline in discretionary income due to losses of high-paying jobs like oil and engineering, have hit restaurants, for example.

Tim Bradner is editor of the Alaska Legislative Digest and is a Visiting Professor of Journalism this spring at University of Alaska Anchorage.