Providing coverage of Alaska and northern Canada's oil and gas industry
January 2018

Vol. 23, No. 2 Week of January 14, 2018

Rate of Alaska job losses is slowing

State employment forecast points to flattening trend as job counts stabilize at lower levels especially in the oil industry

Alan Bailey

Petroleum News

The state of Alaska’s employment forecast for 2018, published by the Department of Labor and Workforce Development in the January edition of Alaska Economic Trends, points to a slowing rate of job losses in the state, as the current recession continues to work its way through the economy. The sharp fall in the price of oil in 2014 triggered a slowing of the economy, with the rate of job losses hitting a peak of 1.9 percent in 2016, driven mainly by cuts in expenditure by the oil industry and state government. Job losses slowed to 1.1 percent in 2017 - the state expects this slowing trend to continue, with losses running at perhaps 0.5 percent in 2018.

With the oil and gas industry, state government, professional and business services, and construction already having taken significant hits in the last couple of years, employment levels in these areas are now stabilizing at lower levels than previously. However, the knock-on effect of lower numbers of employees in these sectors of the economy will continue to impact services such as stores, bars and restaurants, and will also to make inroads into state spending, the economic forecast says.

Further job losses

The forecast does anticipate further oil and gas industry job losses of about 500 in 2018, but this rate of loss would be much lower than the loss of 2,900 jobs in 2016 and would amount to one third of the losses in 2017. The industry does now see several new development projects on the horizon, but these are long-term prospects that will likely have minimal impact on employment in 2018, the forecast suggests.

The downturn in state spending early in the recession had a major impact on construction employment, as state capital projects dried up. Similarly, professional and business services, which are closely tied to the oil industry and to construction, took a major hit. In 2016 1,400 jobs were lost in construction and 1,600 jobs were lost in professional and business services. But, as in the oil industry, job losses in these sectors slowed in 2017 and seem set to slow further in the coming year, the forecast says.

A third wave of the recession, the wave impacting businesses that rely on peoples’ spending, is still underway. Service industries, including retail, wholesale, bars, restaurants and entertainment, are seeing sustained employment decline rates, albeit at much lower levels of loss than those seen in the primary industries. Retail trade, for example, saw job losses of 200 in 2016 and 500 in 2017. The forecast anticipates further job losses of some 200 in 2018. However, in Southeast Alaska in particular, the visitor industry provides support for retail businesses.

Some sectors resilient

Some sectors of the economy have been weathering the recession unscathed, the forecast says. In particular, the healthcare industry has actually continued with robust growth that began about 30 years ago - increased health insurance coverage through Medicaid expansion, for example, has driven increased demand for medical services, the forecast says. Between 2015 and 2017 healthcare employment in the state increased by 2,900. The forecast anticipates an additional 700 jobs in 2018.

Employment in manufacturing, the majority of which consists of seafood processing but which also includes breweries, bakeries, the manufacture of wood products and so on, has not been especially impacted by the recession. These industries tend to depend on demand and pricing external to the state.

Local government employment, with funding from a variety of sources, has been growing slightly. This sector includes tribal governments and the operation of public schools. In-state employment by the federal government has been fluctuating but is likely to remain flat in 2018, the forecast says.

Comparison with other states

In comparison with other U.S. states, Alaska’s resource dependent economy ranked 50th in terms of both the unemployment rate and job growth in November. However, rates of pay in the state remain relatively high, ranking eighth in terms of hourly earnings both for private industry and for the leisure and hospitality industries. Earnings for financial activities ranked 21st.

One positive indicator is growth in the state’s domestic product during the second quarter of 2017, with that growth coming in above the state’s 10-year average. The state’s population has remained relatively stable, despite the job losses. And the third quarter of 2017 saw a slight year-on-year rise in the price of homes across the state, the forecast says.

But the forecast cautions that, although the state has been able to absorb some of the initial blow from the fall in oil prices through spending from state savings, the lack a longer-term fix to the state’s fiscal woes will create uncertainty and will hinder future growth

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