Economy leveling off, experts say

Economists say the state’s economy appears to be levelling off after a three-year decline in jobs and that there are modest upticks in construction and even oil and gas employment, industries hit hard by the slide in oil prices.

Neal Fried, a state labor economist, said oil workers he’s talked to say the talk around the job sites is no longer about layoffs. “That seems to have stopped. Oil prices are up a bit, there are new discoveries companies are hiring again,” Fried said.

The falloff in Alaska employment began in 2016 when oil prices dropped from over $100 per barrel to below $40, causing oil companies and contractors to slow projects and lay off workers.

That was followed by reductions of workers in state agencies as oil revenues plummeted, causing Gov. Bill Walker and the Legislature to cut spending.

About 2,900 state jobs have been cut since 2015, bringing the state workforce down to about 22,000. Oil and gas is down about 5,000 workers from 2015.

Oil reached 8,800 employed last November, its lowest in years, but has since climbed back to about 9,500, Fried said. Construction is showing a small but encouraging gain of 200 jobs, but employment had dropped so low that it seemed at rock bottom, he said.

It took time, but the ripple effects of losing well-paying industry and government jobs has spread through the economy, showing up in industries like retail, which depend on consumer confidence.

Job losses are slowing, however. In 2016 employment contracted 1.9 percent, followed by a 1.5 percent drop in 2017.

Now the worst seems to be over. In the first six months of 2018 the job count dropped only 0.6 percent, Fried said. In July it dropped only 0.3 percent. If the trend continues things may have leveled off by the end of 2018.

An interesting aspect of the current recession is that it appears to have had little effect on home values or foreclosure rates, which are usually expected. One reason for this, Fried said, is that most resident Alaskans who lost jobs have either found new work in the same industries or shifted to employment in other fields.

Relatively few have left the state.

For example, according to a recent Department of Labor and Workforce Development study just over 60 percent of oil workers laid off since 2015 are still employed in petroleum, having found other jobs; about 58 percent of construction works laid off are at work in that industry, and over 70 percent of state workers who left jobs since 2015 are still employed in government.

About 25 percent of laid-off oil workers are now employed in different industries; about 20 percent of construction workers are in employed different fields, and about 10 percent of state workers have switched to non-government employers.

Only a minor percentage appear to have left the state – 10 percent for both petroleum and construction and five percent of former state workers. These counts are of residents (i.e. Permanent Fund Dividend recipients). Statewide about 30 percent of workers are nonresident.

Alaska residential home sale prices are actually up this year and don’t appear to be affected by the recession, according to state data. The average so far in 2018 is $331,637, up from $313,146 in 2017 and $321,478 in 2016. There’s also no sign of an increase in home foreclosures. In fact, the number for 2018 appears to have dropped. That shows stability in the number of Alaskans who own homes. However, residential rental vacancy rates, mainly apartments, are up in 2018 but only modestly, at 7.9 percent compared with 7.3 percent in 2017. That shows some increasing movements among Alaskans who rent, who tend to be younger and mobile.

Despite the leveling trend in the job numbers many economists, including Fried, are still cautious. Oil prices are volatile and could drop back, he said.

Mouhcine Guettabi, an economist at the University of Alaska’s Institute of Social and Economic Research, said he is still not seeing anything in the job numbers that give real encouragement.

The decline may be leveling off, but it’s unclear what will add back several thousand lost jobs. Recent oil discoveries on the North Slope are encouraging but it will take several years for projects to get into construction. It’s unlikely there will be any significant increase in state or local government payrolls soon.

Construction has been hit so hard by the near-evaporation of a state capital budget and curtailment of private construction that even modest increases in construction spending can seem big. In July state labor data shows construction up 1.7 percent, but that was 300 jobs.

What’s appears to be causing this is new building activity at Interior Alaska military installations, Fried said. This is related to the incoming F-35 fighter squadrons at Eielson Air Force Base and upgrades to missile defense facilities and radar at Fort Greely and Clear Air Force Station, all in the Interior.

Other construction is essentially flat or still declining. “Residential building in Anchorage is at one of its lowest levels in years,” Fried said. Interestingly, homebuilding in the Matanuska-Susitna Borough showed a small increase in 2917 over 2016. ‘“Last year about half of all the new residential housing in the state was built in Mat-Su,” Fried said. No data for 2018 is available yet for Mat-Su, however.

There are some brighter spots in the economy. Tourism is up, driven by sharp increases in cruise ship passengers. Those totaled 1,089 million last year and are projected to reach 1,165 million this year. Next year 1.31 million cruise visitors are expected.

Uniformed military personnel at Alaska bases are stable, totaling 21,042 in 2017, unchanged since 2016 and up slightly from 20,838 in 2015, Fried said.

Employment in mining, a high-wage industry, is stable and has even increased, with 2,076 at work in the minerals industry in 2017 compared with 2,945 in 2016. The preliminary number for the first six months of 2018 is even better, at 3,126.