Small increase in employment could signal end of recession is near

Statewide employment turned a corner in January and February, showing the first increase, though it was small, after three years of job losses. For the job count was up 0.1 percent, or 400 jobs in February, and it would appear to be a signal that the recession is ending or is at least near.

There were 315,100 Alaskans employed in wage and salary jobs in February. Self-employed people are not included in the count.

“Overall, the state’s industry sectors were a mix of mostly small gains and losses. The private sector was up 800 jobs and government was down 400,” the labor department said in a press release.

However, the data is from the month just before March, when Gov. Mike Dunleavy released a proposed state budget with large spending reductions. If implemented, the $1.6 billion in spending reductions the governor proposes would over time cost the economy about 11,800 jobs, according to a University of Alaska analysis. It would effectively extending the recession.

However, the Legislature is resisting the governor’s cuts and whether they will happen remains uncertain.

The small increase in statewide employment reported for February by the state Department of Labor and Workforce Development was led by growth in petroleum, which added 500 workers, and construction, which added 1,000.

Oil and construction were the same industries that first declined when the state’s recession hit in late 2915. Petroleum workers increased 5 percent in February while construction was up 7 percent.

Some industries are still shedding jobs, however. Retail employment was down 300, for example. But leisure and hospitality, a sector that includes bars and restaurants, was up 300, a reflection that Alaskans still have disposable income. In the government sector, state employment was flat in February while federal and local government were each down 200 for a total loss of 400 for government.

One aspect of the February jobs report is the slowing of health care employment increases. Health care jobs were up 0.5 percent, or 200 jobs, but it was a rate much lower than in previous months. All through the state’s three-year recession health care has been showing strong growth, which helped offset job loss numbers in other industries.

One part of the governor’s state belt-tightening initiative that is now likely to occur are the planned reductions in state Medicaid spending, which can be done without legislative approval. Dunleavy proposes to cut reimbursement rates to medical providers by 5 percent and forgoing an inflation adjustment. This is likely further slow the expansion of employment.

The increase in oil and gas employment is being driven partly by a strong winter drilling adnd exploration season on the North Slope, where companies are working to develop new oil discoveries. One company active this winter, ConocoPhillips Alaska, said it has about 800 employed this winter in drilling, ice road construction and support work, up 100 over winter employment levels in recent winters. “It is a very robust season for us,” company spokesperson Natalie Lowman said.

Construction gains are being influenced by military-related building at Interior Alaska defense installations. Eielson Air Force Base is being readied to receive new F-35 interceptor squadrons and the support personnel and families that will accompany them. New missile interceptor missiles are also being installed at Fort Greely, in eastern Interior Alaska, and a ballistic missile radar facility at Clear, southwest of Fairbanks, is being expanded.

If the governor’s budget were to be adopted there would be widespread economic effects, but these are uncertain at this point. The University of Alaska Anchorage’s Institute of Social and Economic Research has estimated that the aggregate effects of the government reductions in state, local and federal funds would approximate 16,924 jobs to be lost.

This would be partly offset by estimated jobs gained from a “fully-funded” Permanent Fund Dividend, meaning a $3,000 PFD, the governor has promised. ISER puts the job-creation effect of the PFD at 5,047. The net jobs lost, or 16,924 minus 5,047, is estimated at 11,877, according to the ISER analysis.

An unknown in the ISER analysis of the PFD effect is the quality of the jobs created. The university’s work indicates that PFD jobs may be more in retail and temporary in nature. The PFD estimate has more uncertainty to begin with. Most economic assessments including one by the state Dept. of Labor and Workforce Development have not been able to document job-creation effects of the PFD, for example by examining employment data in years of unusually large dividends. No impacts were seen in the data.

The $3,000 PFD proposed for 2019 by the governor would have the effect of adding $696.1 million to the economy but economists have little idea of how much of this “leaks” out of state, such as being spent on vacations, for example, or how much of it fails to enter the economy in the first place, usually because it is saved.