So far layoffs in the state’s petroleum industry have had few effects on the broader Anchorage area economy, data gathered by Anchorage Economic Development Corp. indicates.
As of June, petroleum industry jobs are down 700 compared with the same month of 2015. The six-month year-to-date average has been 600, says Bill Popp, CEO and president of AEDC.
Layoffs in industry jobs started in late 2015 but the reductions have had virtually no effects on the regional unemployment rate, which remains at near-record lows, or on first-time unemployment claims, a key measure of economic strength.
“You would think we would be seeing some kind of effect (of the oil losses). We’re trying to figure it out,” Popp said at AEDC’s three-year economic forecast luncheon held July 27.
There are also job losses in professional and business services, a category also affected by the oil downturn, as well as construction, an industry hit by reduced state capital spending.
Why the lack of impact?
There are two plausible explanations for the relative lack of impact from oil cutbacks, Popp told the AEDC luncheon. One is the state Department of Labor data that shows that about 20 to 30 percent of petroleum workers statewide are non-resident (the number for North Slope oil workers in 40 percent) which means only part of the oil jobs lost are held by Alaskans, he said.
The second factor is many oil and gas workers are taking retirement, if they are eligible, and others are switching jobs, some going into business for themselves, Popp said.
A big share of retirees wind up staying in Alaska as do many job-switchers, so these people are not lost to the economy, he said.
Two-year impact
That said, the combined effects of reduced industry employment and spending and reductions in state expenditures will be felt over the next two years. In January AEDC estimated a total job loss of 1,600 for Anchorage in 2016, an approximate 1 percent decline, and data for the first half of the year shows the estimate to be on track.
Another 1,500 jobs are expected to be lost in 2017, for a 2-year total of a 2 percent decline, Popp told people at the luncheon. After that AEDC predicts a leveling off with slow growth resuming in 2018 due partly to expectations of a slowly rising oil price and a gradual resumption of industry activity.
“At this point we’re not hearing rumors of any more big layoffs in the industry. We believe things may have hit bottom,” Popp said.
“It’s worth noting in June, 2005 there were only 7,900 oil workers in the state. Even with the recent layoffs we’re still more than 50 percent above 2005,” he said.
Two consulting firms, McDowell Group and Northern Economics, assisted AEDC with its projections. The flattening of total job losses in 2018 and resumed slow growth after that are based partly on expectations of an average oil price of $40 per barrel in 2016; $50 per barrel in 2017; $53 per barrel in 2017; and $55 per barrel in 2018.
The evolution of technology in the industry, as in shale oil production, will help keep a lid on prices. “We do not foresee a return to $100-per-barrel prices in the foreseeable future,” Popp said.
Growth in some areas
Some jobs in the regional economy are showing growth, however. Health care has been a spurt in employment possibly due to the resolution of lawsuits against Medicaid expansion in the state, which gives employers in health care confidence in growth in demand for medical services.
Leisure and hospitality, and transportation, two sectors affected by the robust 2016 tourism season, are also seeing gains. So is, surprisingly, government employment, Popp said. While there are declines in state employment due to budget cuts these are largely offset by gains in federal jobs in the Anchorage area.
“There seem to be broad gains across several federal agencies. This does not include the military,” Popp said.
