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Hope exists amid continuing recession Job losses in Alaska continued in first half of year but there is cause for some optimism about the future of the state’s economy Alan Bailey Petroleum News
As Alaska’s recession persists, job losses continued in the first four months of this year, Neal Fried, economist with the Alaska Department of Labor and Workforce Development, told the Resource Development Council’s annual meeting on Nov. 15. However, in May and June the rate of job losses showed a slowing trend. And there are positive factors such as a rising oil price and new oil discoveries that could presage well for the future, Fried said. More job losses The data suggest that Alaska is heading for total job losses of about 5,600 this year, a similar figure to last year. And, as before, the oil and gas industry is the biggest loser in the job loss league table, Fried said. Construction is also seeing another rough year, he said. The retail industry has started to appear in the job loss figures, perhaps because people are buying less or maybe because of an increased use of e-commerce. The job losses in professional and business services have softened, perhaps because of exploration activity in the mining industry. Employment in the catering industry - restaurants and bars - has not changed much, helped by a buoyant visitor industry and the importance of the catering services to local consumers.
Looking specifically at Prudhoe Bay, a bellwether area for oil industry employment, the job level there reached an all-time peak of more than 13,000 in March 2015. Since then employment has fallen dramatically, continuing to fall in the second quarter of this year to less than 9,000 after leveling somewhat in the first quarter. It will be interesting to what happens next, Fried said.
On the plus side of the equation, there has been continuing employment growth in healthcare and local government employment seems to have stabilized.
Long-term growth Despite the gloom surrounding recessions, it is important to realize that economies generally grow over time, Fried said. In Alaska, despite three previous recessions since statehood, the economy has added jobs 89 percent of the time, a track record of job growth only exceeded by Arizona and Nevada across all 50 states, he said.
And recessions typically do not last long. In Alaska, where a recession is defined as a period of job losses over a period of at least three quarters, there were recessions in 1970, the 1980s and in 2009. The recession in the mid-1980s was by far the most severe, lasting nine quarters, while the others were quite mild. When it comes to the current recession, the job situation is back to where it was in 2012 and needs to recover to the situation in 2015, Fried said.
Determining whether the slowdown in job losses seen in May and June proves to be a continuing trend will depend on data for the second half of the year, when those data become available. Fried said.
On the other hand, the unemployment rate in the state, at about 7.2 percent, has stayed close to its 10-year average, he said.
One issue that causes great angst among Alaska residents is the potential impact of the recession on the real estate market. People still sense the trauma of the real estate crash that happened during the recession in the 1980s, Fried said. But most recessions do not have much impact on real estate and house prices have hardly changed during the current downturn in the Alaska economy. The number of houses sold each year has hardly changed, and the number of foreclosures continues to decline. On the other hand, the vacancy rate for residential properties has been increasing, Fried said.
Positive outlook? There are some positive factors appearing over the horizon.
The oil price, for example, has been rising and there has been some progress in moves to export natural gas from the North Slope. While ConocoPhillips is conducting a very active exploration season on the North Slope, there have also been some large new oil discoveries. There has been a second year of increasing North Slope oil production.
Looking beyond oil and gas, the Alaska economy is perhaps a little more diverse than is generally realized, Fried suggested. The fisheries industry has been growing and adding to economic diversity, with a particularly good salmon season this year. Mining has been doing well, and the visitor industry saw a record year in 2017. Employment has continued to drop in the timber industry, although there may be some growth in this industry next year. And the military continues to provide stability in the economy.
Thus, even if the oil industry simply stabilizes rather than grows, growth in other sectors could set the economy back on an overall growth path, Fried suggested.
Moreover, the Alaska population has continued to grow somewhat during the recession. It appears that new births have more than compensated for the outmigration of people from the state.
Cultural parameters On a light-hearted note, Fried presented a number of parameters which, while unclear in regard to their significance for the Alaska economy, perhaps raise interesting insights into the Alaska culture. While Alaska’s coffee industry continues to thrive, the microbrewery industry is booming, having grown steadily since the early 2000s. Taxes from marijuana sales have been growing steadily but, failing some massive consumption of the material by all state residents, will not solve the state’s fiscal crisis. The number of pickup truck registrations in Alaska continues to climb: One of the more curious statistics is that the Bristol Bay region now has more pickup trucks than human beings, Fried commented.
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