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ISER reports loss of Alaska jobs Research paper assesses the impact of the oil price fall on the state’s economy; 2,261 jobs gone between March 2014 and March 2016 ALAN BAILEY Petroleum News
Using employment levels as a measure of the health of the Alaska economy, a new research paper published by Mouhcine Guettabi, an assistant professor in the University of Alaska’s Institute of Social and Economic Research, has assessed the impact of the fall in the price of oil on the state’s economic wellbeing. The paper indicates that the state lost a total of 2,261 jobs, a fall of nearly 1 percent, between March 2014 and March 2016. The employment data only apply to wage and salary jobs and do not apply to military personnel or to people such as fishermen who are self employed.
In March 2014 the oil price was more that $100 per barrel but dropped precipitously later in that year. March 2016 is the latest month for which reliable employment data are available, Guettabi wrote.
A delayed impact With high state budgets and many sanctioned industrial projects continuing after the oil price drop, it took a year or so for the sudden low oil price to significantly impact employment levels, Guettabi wrote. And when the job numbers did go down, the hardest hit sectors were state government and the oil and gas industry. Those job losses and associated activity curtailments then impacted professional and business services, including the construction industry.
Clearly the job losses relating to state government resulted from the state’s dependence on oil revenues for 90 percent of its funding, while oil industry activity is sensitive to the impact of the oil price on project and oil field economics.
Overall, during the period studied 1,518 private industry and 1,691 state government jobs were lost, Guettabi wrote.
On the other hand, employment increased in some sectors of the economy: The health care sector added more than 1,400 jobs, while local government employment grew by more than 700 jobs. In the private sector there were also significant job gains in work relating to trade, transportation and the utilities; in the leisure and hospitality industries; and in manufacturing. Private education services also saw some job gains.
Regional differences In general, the impact of job losses varied considerably between different regions of the state. Anchorage, with the evaporation of 1,485 employment positions, saw by far the biggest hit. Of those job losses, 1,133 came from the private sector and 582 from state government, with small employment gains seen in federal and local government. Substantial job losses were also recorded in Fairbanks, the North Slope and the Kenai Peninsula.
On the other hand, some regions of the state saw overall employment gains. In particular, the Matanuska-Susitna region saw employment grow by 1,133 positions - 906 of those new positions came in the private sector, with the remainder coming in local, state and federal government. In the Aleutians, a substantial employment drop in the western Aleutians was counterbalanced by an almost equal employment rise in the eastern Aleutians.
The North Slope, a region with a financial economy tied to oil, saw job losses of 637 in the private sector and remains vulnerable to the future fortunes of the oil industry. The economy of Juneau, with 24 percent of its employment coming from the state government, appears vulnerable to the future viability of state finances.
Guettabi also cautioned that local government employment, although growing of late, is particularly vulnerable to the continuing impact of state spending cuts - on average, around one third of local government revenues comes from the state. And in many areas of the state, especially remote rural areas, local government can account for more than half of the available job positions, Guettabi wrote.
The future outlook Guettabi wrote that ISER anticipates employment in Alaska continuing to fall in the future, perhaps by 2 percent by the end of 2016 and another 1.5 percent in 2017. The severity of the ensuing economic slowdown will depend on the multiplier effect of initial job losses triggering further job losses through a chain of economic interdependence. Future consumer confidence will also play a role.
The state government also must balance the state budget, Guettabi wrote. And, although dealing with the budget may exacerbate the strain on the economy in the short term, in the long run a balanced budget will make the Alaska economy stronger, he commented.
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