Alaskanomics

Anchorage Economic Development Corporation 3-Year Outlook

The Anchorage Economic Development Corporation (AEDC) hosted its annual 3-Year-Outlook Luncheon on Wednesday. In recent months, many have expressed concern about the future of the economy in Anchorage. There has been worry that it is a repeat of the crash of the 1980’s and many are wondering if it is time to abandon ship and leave Anchorage. AEDC President and CEO Bill Popp assured the audience that while we are seeing a drop in the economy, we are in a much better place than the mid-80’s and it is not time to panic.

He started his presentation with notes about the past year and first half of 2016. There has been a marked shift in the housing market in Anchorage. For the past four years it has been a seller’s market, but we are now firmly in a buyer’s market with average sale price dropping slightly from 2015. Alaska continues to be ranked in the top five states for our low number of foreclosures behind only Washington DC, North Dakota and West Virginia. Bankruptcy filings are low and Alaska banks and credit unions have a good amount of cash on deposit. All of these signs show that we are not in the same situation that we were 30 years ago.

Popp continued with the 2016 jobs update. A quick recap of 2015; Anchorage had record high employment, saw an increase of 1,000 jobs and the average unemployment rate was 5.0 percent. In the first six months of 2016, Anchorage lost 900 jobs, which is a 0.6 percent decline. The year-to-date unemployment is 5.5 percent. June was a difficult month for the oil and gas industry, specifically the loss of 400 jobs at Shell. Construction and professional/business services also saw a large decrease in June. There were winners in the job market in the first half of 2016. Health care, retail, government, transportation, and leisure and hospitality all saw gains through June of 2016.

As a measure of the economy, initial unemployment claims and continuing unemployment claims did not have a sharp increase in 2016 as compared to the 2^nd quarter of previous years. Another way to measure the economy is through real GDP. Alaska ranks 45^th in the nation for real GDP with $54 billion and is 0.3 percent of the national economy. This may seem low, but Alaska’s per capita rank is much higher. A potential concern is that Alaska is one of only two states to have a decrease in real GDP from 2014 to 2015. Alaska’s real GDP decreased 0.5 percent last year and is 50^th in front of only North Dakota, who had a loss of 2.1 percent. While the measures are starting to show a slowing of the Alaska and Anchorage economy, it is not a catastrophe and there are still bright spots in the economy.

Popp’s presentation shifted to the Anchorage Consumer Index Report. This year was the first time that the overall index dropped below 50 percent, showing that Anchorage business leaders are not optimistic about the future of Anchorage’s economy. The index is at 48.2 and could easily shift above 50 if things begin to improve. The index measures three things: Local Economy Confidence, Personal Financial Confidence, and Future Expectations. Confidence in the local economy (50.8) and personal finance (65.7) is still over 50, but future expectations (38.2) is at the lowest mark that AEDC has seen in the history of the survey. This is problematic because while people are confident in their own finances and the local economy, if confidence in the future continues to be low, it will change spending habits and will cause problems for the economy.

The local presentation wrapped up with AEDC’s 3-Year Outlook. We will see a slight decrease in population in Anchorage this year, followed by a few steady years before moving to a slight increase in 2019. The same is predicted for the number of jobs in Anchorage through 2019. This is after four years of near record employment in Anchorage.  Personal income is predicted to drop slightly in 2016, which is a reflection of the $1,000 Permanent Fund Dividend. This year’s dividend will be approximately the same amount as it was in 2013.

Air passenger volume through the airport has been on the rise since 2013 and is expected to continue because of global unrest. Alaska is still a safe place to visit, but is also exotic to travelers from the Lower 48 and worldwide. Anchorage air freight volume spiked in 2015 and made Anchorage the 4^th busiest air cargo airport in the world, behind Memphis, Hong Kong and Shanghai. 2016 and beyond is expected to drop slightly from 2015 but maintain strong volume through 2019. The same is predicted for volume through the Port of Anchorage, which sees 80 percent of goods that come into Alaska.

Popp summarized his presentation with the following bullet points.

• 27 years of steady economic growth has come to an end in 2015
• The pinch is ongoing and likely to continue through 2017
• Anchorage’s return to growth is possible by 2019
• While painful, the pinch is not a punch!
• Even in a downturn there will be opportunities
• Now is not the time for a NAP (No-Action Plan). We need to fix State finances now!

There is a mix of good news and bad news when looking at 2016 and into the future, but Anchorage is not facing the catastrophe that it was 30 years ago. We can all work together to ensure a strong future for Anchorage and Alaska.

Unemployment Rate Remains at 6.7 Percent in June

By Mark Edwards

According to preliminary Federal Department of Labor estimates, June was actually a good month and Alaska employment was 0.4% higher than June of 2015.  June of 2016 had 359,400 jobs (rounded) vs. 358,200 at June of last year.  The best estimate we have at this time for 2016 would be to average the employment numbers for January to June and then compare that to the average of the first six months of 2015.  January, February and June had more jobs in 2016 and March, April and May were stronger in 2015.  The six month average of jobs was 335,350 in 2015 and 334,917 in 2016.  This is an average of 433 few jobs this year or 0.1% less.  With statistical revision coming on the preliminary data it is basically saying flat employment with no change on a 6 month average compared to the first half of last year. 

This data set can be found at the State's Department of Labor website.

The Quarterly Census of Employment and Wages (QCEW) is the most accurate information on employment because it is based on actual tax returns, rather than survey estimates.  However, there is a delay of several months until the information is available.  There is currently no 2016 data published.  We expect some adjustments to this information, likely slightly downward, when the QCEW data for the first quarter of 2016 is released.  It can be found online. 

The Department of Labor's Press Release on June employment can be found on their website.

Alaska LNG Resource Reports Available Online

By Larry Persily
July 20, 2016
 
Alaska LNG’s resource reports to the Federal Energy Regulatory Commission are available on the Kenai Peninsula Borough website. Click here and select the report. As of July 20, Report No. 1 General Project Description and No. 10 Project Alternatives are available on the website; others will be added as they become available in the next week or two. (The files are very large and download time with vary with your Internet connection speed.)
 
The reports are the second drafts submitted to FERC — the first were submitted in February 2015 — and will be reviewed by federal and state regulatory agencies. Alaska LNG will fill in any remaining gaps and answer agency requests for additional information in its final reports to FERC.
 
The final resource reports could be ready for delivery to FERC by the end of this year, along with a complete project application, though partners ExxonMobil, BP, ConocoPhillips and the state of Alaska are undecided on that next step due to weak market conditions, low prices and a global oversupply of LNG.
 
FERC would use the final resource reports as the base for its preparation of the project’s environmental impact statement. The reports provide detailed information on pipeline routing, waterway crossings, community impacts and multiple environmental issues for construction and operation of the liquefaction plant and marine terminal in Nikiski, gas treatment plant on the North Slope, and 804 miles of pipeline connecting the two facilities.
 
Alaska LNG filed reports No. 1 General Project Description, which includes detailed project maps, and No. 10 Project Alternatives on July 8. It filed reports No. 2 Water Use and Quality and Wastewater Discharge, No. 4 Cultural Resources, No. 6 Geological Resources and No. 7 Soils on July 19-20 and those files will be added to the borough website soon.
 
Other reports are expected within the next couple weeks: 

• No. 3: Fish, Wildlife and Vegetation
• No. 5: Socioeconomics
• No. 8: Land Use, Recreation and Aesthetics
• No. 9: Air and Noise Quality
• No. 11: Reliability and Safety
• No. 12: PCB Contamination
• No. 13: Engineering and Design Material

Walker Administration Report on Effects of No-Action Plan

Governor Walker’s administration released a report of the consequences facing Alaskans as a result of the legislature’s failure to pass a sustainable fiscal plan.

From his July 13, 2016 press release, the Governor said:

“I thank the 29^th Legislature for convening its fifth special legislative session to consider a truly historic Alaskan challenge.  I have said many times: our new fiscal reality only constitutes a ‘crisis’ if we fail to act. Unfortunately, after a regular, extended, and special legislative session this year, 90 percent of our fiscal problem remains – with little optimism for reasonable compromise. It’s clear now: We have a serious fiscal crisis.

How we deal with this crisis will define us all – with no less than Alaska’s future hanging in the balance.  I therefore expect, and all Alaskans should demand, compromise and affirmative action by this Legislature on a comprehensive solution to our massive budget deficit during this special legislative session. I do appreciate the Senate’s good work in passing SB 128 to restructure the permanent fund.

There are currently three fiscal plans in play. There’s the Governor’s New Sustainable Alaska Plan, which will continue to force government efficiency while maintaining most current state services. But there are also two alternate plans: The No Action Plan (NAP) and the SB128-Only (Permanent Fund Restructure) Plan.

Under either alternate plan, devastating cuts to state services are required. To view Alaska under either of these scenarios, click here: Alternate Plans.

The Alaska Legislature will choose one of these three plans during this fifth special legislative session.  Failure to adopt the New Sustainable Alaska Plan will, by default, mean choosing the No Action Plan (NAP).  If the Legislature were to only pass SB128, then the SB128-Only Plan goes forward. One way or another, one of these three plans will go into effect when the Legislature gavels out of the fifth special session.

I will ask every legislator and every candidate for the legislature to choose which of these three plans they support.  Failure to choose a plan will constitute support for the No Action Plan (NAP).  After Alaskans become familiar with the type of Alaska each of these three plans represents, voters will be much better informed about who should represent them in Juneau.”

 

The team at Alaskanomics encourages Alaskans to stay engaged in the situation and be familiar with the Governor’s plan, as well as alternative plans. Let your legislator know that inaction is not acceptable and we must move forward to find a sustainable plan for all Alaskans. Find more information on the Governor's plan at the Governor's website.