The Alaska Department of Labor and Workforce Development is expecting “another tough year” for the Alaska oil industry in 2017, although slightly easier than last year.
While the sector lost some 2,800 jobs in 2016 for a 19.7 percent decline from 2015, the state only expects the industry to shed 1,400 jobs this year, for a 12.3 percent. Together, those two years of job losses would push industry employment back to 2006 levels.
The projected slowdown in job losses for the oil industry is largely the result of the severity of job losses from last year, rather than any improvement in the employment forecast. And other sectors will likely feel reverberations from those losses this year.
“Job losses in oil, construction, and the public sector have been so extensive they are causing further job losses in business and professional services, transportation, and leisure and hospitality,” Alaska Department of Labor and Workforce Development Commissioner Heidi Drygas wrote in her department’s annual employment forecast, which was published in the January 2017 issue of the department magazine Trends.
As with 2016, the oil and natural gas sector is expected to have the hardest year of any industry in Alaska. Next is construction, which is closely tied to resource extraction.
The forecast expects the Alaska construction sector to lose 1,200 jobs this year for a 7.4 percent decline over 2016. Those figures would also represent a slight slowdown from the 1,500 jobs shed last year, for an 8.5 percent decline over 2015 employment levels.
The ripple effect from low oil prices also hit the professional and business services sector in 2016. Those fields lost 1,600 jobs in 2016, for a 5.3 percent decline from 2015. The job losses are expected to slow to 500 this year, for a 1.8 percent decline from last year.
While the oil industry is expected to see a slight decline in job losses this year, the entire state should see an increase, from a 2 percent drop in 2016 to a 2.3 percent drop this year, highlighting the way oil industry job cuts are felt through the wider economy. The only sector of the Alaska economy expected to add jobs this coming year is health care.
Anchorage even worse
The employment forecast is even starker in Anchorage, where 40 percent of the Alaska oil industry lives - some 5,200 workers earning more than $700 million in wages.
The oil and natural gas sector in the city is expected to lose 300 jobs this year for an 11.1 percent decline, down from 700 lost jobs last year for an 18.9 percent decline.
Anchorage lost more than 3,000 jobs in 2016 for a 2.3 percent decline and is forecasted to lose some 2,800 jobs this year, for a 2 percent decline. The continuing decline comes as job losses in oil, construction and professional and business services in 2016 are expected to spill into leisure and hospitality, retail, transportation and financial services this year.
A major difference between the current downturn in employment and previous ones, most notably when oil prices dropped in the 1980s, is the recent success of the oil industry, according to state economist Neal Fried. “This time is different because during the three to four years preceding the drop in price, oil industry expansion and near-record oil revenue expenditures were the biggest factors propping up the state’s modestly growing economy. When that stimulus evaporated in 2015 and 2016, the broader economy lost steam,” Fried wrote in an overview of the Anchorage employment forecast.
The oil industry reached record employment levels in 2015, before oil prices spurred the current cuts. By November 2016, oil industry employment had fallen to 2007 levels.
Adding to the pain of low oil prices were several ill-timed events, including the end of major development work at the ExxonMobil-operated Point Thomson unit and the end of Shell’s exploration campaign in the Chukchi Sea after a decade of fits and starts.
But with ongoing development activities by ConocoPhillips Alaska Inc. and Hilcorp Alaska LLC, and recently headline-grabbing discoveries from Caelus Energy Alaska Inc. and Armstrong Oil & Gas Co., Fried sees some signs for optimism on the horizon.
The Fairbanks economy has also felt some tremors.
While government, military and higher education are the most important segments of the Fairbanks economy, oil and natural plays a large role in the private sector of the Interior.
The report found declining employment in the oil sector as well as the employment sector, and traced declines in retail, leisure and hospitality and utilities to oil prices. The report also connected job declines in profession and business service to the oil industry.
“Job losses on the North Slope affect Fairbanks both directly, as 1,150 Fairbanks residents work there, and indirectly as those jobs generate activity in secondary industries such as retail, leisure and hospitality, and utilities - all of which are losing jobs,” economist Alyssa Rodrigues wrote. “Likewise, the borough’s construction industry has been hurt directly and indirectly by low oil prices. Continued cuts to the state’s capital budget have put a damper on projects, and decreased oil patch activity has reduced employment for construction companies with North Slope project contracts.”
