Numbers show Anchorage recession nearing an end

The recession is still dragging down Anchorage’s economy, but the rate of jobs losses has slowed and even flattened in several key industries. And what may be even more important than that is consumer optimism about a recovery has taken a sharp upswing.

That’s a key finding in the Anchorage Economic Development Corp.’s latest economic forecast, released at an AEDC luncheon on Wednesday, July 25.

AEDC’s overall consumer optimism index, based on telephone surveys, was measured at 57.2 for the second quarter of the year, the highest it has been in three years, Bill Popp, CEO of the economic development corporation, said at the luncheon.

“An index score between 45 and 55 really means the respondent is ‘not sure,’ and a score below 45 means the consumers are pessimistic and above 55 means optimism,” Popp said.

Based on that, a recession psychology seems to be lifting, which means consumers will be more willing to spend. That’s good news, since most of Southcentral Alaska’s economy is based on services, he said.

A deeper dig into the consumer index, however, shows there is still caution, with a 52.3 percent score for confidence in the present Anchorage economy and 54.2 percent in expectations that things will improve.

The trend in expectations is important, Popp said. “Last year at this time it was at 38,” he said.

What drives up the overall score, which is a composite, is that consumers’ sense of their own finances was at 68.1, “the best it has been since 2014,” Popp said.

“This means people feel secure, that their own finances are on solid ground,” he told the luncheon audience.

What may be driving the renewal of confidence is the state Legislature’s action to address and partly solve the state’s financial problems, rising oil prices and news about new oil discoveries on the North Slope, Popp said.

However, consumers will have also have more disposable income to spend in 2018 because of the higher Permanent Fund dividend, set at $1,600 for this year, and federal tax reform.

The higher PFD translates to $375 million paid into the local economy this year, a 45 percent increase over 2017, AEDC’s forecast said. Federal tax reform will reduce Anchorage residents’ tax bills by $90 million in 2018 and by roughly $200 million per year from 2019 through 2022, the forecast said.

Despite these upbeat notes, the basic economic trends for Anchorage are still showing a gradual decline in terms of jobs, population and other indicators, although residential home values and bankruptcies, which are key indicators, are stable, AEDC’s report said.

Interestingly, the data indicates that Anchorage’s population losses are partly to the gain of the Matanuska-Susitna Borough, a trend that’s been growing for several years. Also, the pace of new home construction in the Mat-Su is far outstripping Anchorage, an indicator of robust population growth in the borough.

AEDC is forecasting a 1,500 loss in population in 2018, the difference between out-migration, or people leaving, to in-migration, or new arrivals. “Some people are moving to the Mat-Su but more are probably going to the Lower 48, where the job market is hot,” Popp said. In 2017, 3,100 Anchorage residents moved to the Mat-Su and at least 1,800 Mat-Su residents moved to Anchorage, a net gain of 1,300 for Mat-Su.

Mat-Su’s housing starts compared with Anchorage reflect this trend. AEDC said that in 2017 there were 891 new housing units built in the Mat-Su compared with 532 in Anchorage, with the data from the state Department of Labor and Workforce Development.

McDowell Group estimates, in the AEDC report, that Anchorage’s housing starts will drop to 440 in 2018, although this reflects other factors, such as a chronic shortage of buildable land in the Anchorage bowl.

Building permit values in Anchorage are down in 2018 too, which Popp said mainly reflects the slowdown in public, mainly state-funded, construction, an effect of lean state capital budgets. AEDC’s estimate for 2018 is $380 million in permit values, down from $422 million in 2017 and $549 million in 2015, the year oil prices dropped, and the recession began. Residential permit values are holding steady, however, and there are number of private commercial projects under way, such as a $13.4 million renovation for the former Sears midtown mall that is under way to accommodate new tenants.

In employment, ADEC expects Anchorage to lose 1,100 jobs in 2018, a slower rate of job loss than in 2017 and 2016, but the forecast calls for local employment to stabilize in 2019 and to begin growing slowly in 2020, with a 0.5 percent gain in jobs predicted.

The visitor industry is one bright spot for Anchorage this year, as it is for Mat-Su and many other parts of the state. Tourism growth is being driven by a strong year for cruise tourism, with that driven by the strong national economy. Cruise ship visitors coming across the Gulf of Alaska from Southeast Alaska will be up 20 percent this year.

An indicator of the industry’s strength is that motel and motel “bed tax” revenue to the Municipality of Anchorage is projected at $27.1 million for 2018, up from $25.9 million in 2016 and $25 million in 2016.

Another positive is that air traffic, both for passengers and air cargo, through Anchorage’s Ted Stevens International Airport is still increasing.

Cargo tonnage, mainly international, moving through Anchorage in 2018 is estimated at 3.19 million short tons, up from 3.01 million tons in 2017 and 2.81 million tons in 2016.

The outlook is for continued cargo growth due to the strong domestic and international economy, AEDC’s report said, but Popp cautioned at the luncheon that the growing trade war with China could dampen things.

Passenger traffic, driven partly by tourism, is expected to reach 5.55 “enplanements,” or passengers boarding flights, in 2018, up from 5.47 million in 2017.

AEDC’s economic forecast was compiled by McDowell Group, a Juneau-based economic consulting firm.