Oil, construction lead 2,500 job losses forecast in ’16 on prices

Alaska stands to lose 2,500 jobs in 2016, the first time the state has had year-over-year job losses since 2009. Economist Caroline Schultz of the Alaska Department of Labor and Workforce Development said in the January issue of the department’s Alaska Economic Trends magazine that the 0.7 percent decline in jobs follows a 1,700-job gain in 2015.

She said anticipated job losses are tied to low oil prices and to a lesser extent to declining oil production.

“Sustained low oil prices impinge Alaska’s economy on two fronts: directly, through cuts to oil industry investment and employment, and indirectly, through state government budget deficits that lead to spending cuts.”

Alaska gained jobs in 27 of the last 28 years, Schultz said, but faced with declining oil production combined with low commodity prices, the state is “producing less wealth than it used to, and the oil industry may not serve as a lifeline in the long run,” resulting in employment dips being “more common in the next 28 years than they were in the last.”

The oil and gas industry added more than 6,000 jobs in Alaska between 2005 and 2015, although employers cut more than 1,500 jobs following the 2008 fall in oil prices.

Schultz said the forecast loss of 1,000 jobs this year will return employment to roughly its 2012 level. She said the forecast is “relatively conservative,” accounting for “significant industry cutback” this year, but allowing “for continued project work and the ever-increasing repairs and maintenance required by aging infrastructure in harsh environments.”

The forecast loss in construction jobs is also related to oil, Schultz said, with many new 2015 construction jobs related to oil and gas development and occurred in the off-season.

“The same volume of off-season oil and gas-related work isn’t likely this winter,” she said, since construction is complete on ConocoPhillips Alaska’s CD5 drill site at the Colville River unit and on ExxonMobil’s Point Thomson project.

With both public and private investment pinched, construction is expected to lose 900 jobs this year, she said, a drop well within the range of historical average declines.

State government was down 700 jobs in 2015, the largest drop of any reported group, and is forecast to lose another 1,000 jobs this year.

Schultz said private industry job losses in 2016 will mostly be confined to companies affected by low oil prices, but a loss of 300 jobs in the professional and business services sector includes many losses in firms which support the oil, mining and construction industries with geophysical work, engineering, architecture and other scientific and technical services.

Department of Labor economist Neal Fried said while Anchorage employment has grown nearly every year since 1988, “continuing low oil prices make another year of economic growth unlikely.”

Anchorage’s employment grew despite low oil prices, industry layoffs and fiscal deficits in the 1990s, he said, but things are different today, with a larger state budget deficit, a record-high oil industry workforce, recent muted economic growth and oil production less than half of what it was in 1999.

Fried said that because Anchorage is headquarters for the state’s oil and gas industry, “any layoffs would spur broader economic fallout.” (See page 1 story on planned BP layoffs.)

Other dampers for the Anchorage economy include state government job losses and low prices for other commodities such as mining and fishing.

Fried said employment levels at Prudhoe Bay have grown every year in the past decade except 2008, generating growth in Anchorage headquarters’ jobs. Last year Prudhoe employment reached a new high, almost 13,000.

“The oil industry has largely buoyed the economy in Anchorage over the past two or three years, but that isn’t likely in 2016, and the industry is forecast to lose about 400 jobs in Anchorage, or 11.8 percent,” he said.

National oil industry employment has already slipped to 2012 levels, Fried said, noting that Alaska’s oil industry job losses may be slower because “Alaska’s industry is more project-based, so it only shows job loss once existing projects end.”

He said Anchorage construction is likely to slow, with building permits down, completion of large utility and commercial building projects and economic uncertainty.

Losses in oil and construction will have an impact on professional and business services, particularly in the architectural and engineering services areas, 22 percent of the industry, and “strongly tied to oil and construction.”

- KRISTEN NELSON