Alaska’s economy turned corner in 4th qtr 2018, now in recovery
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In 2018 economist Neal Fried told the Resource Development Council’s annual meeting that the state’s current recession, only the third in its history, had become the longest at three years.
The story is different this year. Fried, with the Alaska Department of Labor and Workforce Development, said Nov. 20 at this year’s annual meeting that the state’s economy has turned around. That turnaround started in the last quarter of 2018, when employment numbers started to be positive, he said.
The big story for 2019 is that the economy is in recovery, up by half a percent, compared to down by half a percent last year. It’s a pretty modest change, he said, with not a lot of difference in overall economic activity, but movement is in the right direction.
“Economies do not operate on a calendar year,” Fried said. “They’re much more organic than that. … I wouldn’t have said this last year, but the forces that are already in play in our economy will be largely the forces operating in 2020.”
Preliminary numbers for 2019 show an increase in some 1,800 jobs, according to a slide illustrating the talk. By comparison, the 0.5% drop in 2018 represents some 1,200 jobs.
There’s a better story in total wages, Fried said, with payroll for 2018 at some $18 billion, up 2.9%, and a payroll growth of 4% indicated by preliminary figures for 2019.
Payroll began to recover before employment, he said, because some of the higher wage industries, like oil and gas, construction, business and professional services, were in that 2018 recovery so more money began to pour into the economy and probably helped lead the recovery.
Unemployment rateAlaska’s unemployment, at 6.2%, is the highest rate in the U.S., which is not unusual, Fried said.
But it’s the lowest rate the state has had since the early 1970s when consistent statistics started to be kept.
And the 3.6% U.S. unemployment rate is the lowest in 50 years, putting Alaska’s numbers in check, he said with many having a difficult time recruiting workers even with slow economic growth.
Nonresident hire has been falling for the last two or three years, Fried said, with nonresident wages topping out at 16.1% in 2015 and falling in both 2016 and 2017.
Sector employmentAlaska oil industry employment began to recover in 2018, Fried said, recovery which is continuing in 2019, but with a long way to go from highs in early 2015. The accompanying slide shows peaks at more than 15,000 in the industry, dropping to below 10,000 in 2017 and just now edging back up to the 10,000 mark.
Construction shows the largest increase in employment numbers, Fried said, but because that industry peaked in the early 2000s it has a long way to go. A slide reflecting 2015-19 numbers shows construction employment dropping in 2016 and 2017 and beginning to recover in 2018.
There aren’t a lot of new homes being built in Alaska, Fried said, with last year one of the lowest since the early 1990s and 2020 not expected to be much different. New housing stood at 4,156 units in 2006, dropping to 3,249 in 2007, then hovering mostly in the 2,000s and dropping to 1,659 last year.
Residential vacancy rates are trending upward, from 4.4% in 2011 to 7.9% in 2018 and 8.6% in 2019, and home prices have changed little.
Fried said that as a result of little change in home prices, housing is more affordable in Alaska, as opposed to what’s happening in the rest of the country. And home sales, he said, have been very stable with little change year to year.
PopulationThere has been little change in Alaska’s population, Fried said. It peaked in 2016 and has come down a little, falling slightly in 2018, down less than half a percent. The details, from a slide Fried presented, show the 2018 population at 736,239, with 10,737 births, 4,398 deaths and outmigration of 8,885, for a total population loss of 7,577.
The state has been losing population to outmigration since 2012-13, the longest period of outmigration in the state’s history, Fried said. In 2011-12, net migration was minus 1,864. In the most recent data, for 2017-18, net migration was minus 7,577.
A lot of people move in and out of the state each year, Fried said, and with the economy in the Lower 48 booming, people won’t come up here in high numbers.
Alaska is in the lowest period of inflation in out history, he said, and because of housing, 2019 might come in negative, deflationary.
Slide data show inflation for Anchorage and urban Alaska at 1.8% in 2010, topping out at 3.2% in 2011, dropping to under 1% for 2015-2017, rising to 3% in 2018 and likely to be a minus 0.3% for 2019.
In 1986, the cost of living in Anchorage was 141 compared to a U.S. index of 100 - and that was topped only by Manhattan and San Francisco.
But that has changed, Fried said, calling it good for investment in the state: In 2019, Anchorage is at 127, and is topped by 15 to 17 communities, with Seattle, by comparison at 159.
- KRISTEN NELSON