Alaskanomics

AEDC Annual Forecast Lunch Recap

The Anchorage Economic Development Corporation (AEDC) hosted its annual Economic Forecast Luncheon on Wednesday. The event is a chance to review the economic situation of the past year and look to the current year and what to expect for the future.

AEDC President & CEO Bill Popp started his presentation with interesting facts about Anchorage’s economy compared to the rest of the state. In round numbers, Anchorage contributes $25 billion to Alaska’s $50 billion GDP. 2017 had a 4.3 percent increase after four years of decline. Logistics is our number one industry in Anchorage, contributing about $3.8 billion, while real estate was the 2^nd largest industry at $2.8 billion. This past year, Anchorage had an inflation rate of 2.1 percent, which was only slightly lower than the national average of 2.5 percent.

A quick recap of 2018 provided encouraging numbers that Anchorage was heading out of the recession that has been felt throughout Alaska for the past couple of years. In 2018, Anchorage lost an estimated 1,200 jobs, which is a 0.8 percent loss over 2017. The biggest loser of jobs this past year was retail. Many of these jobs were lost because of national reasons and were not specifically related to the Anchorage economy. National retailers such as Sear and Sam’s Club left the state. On a positive note, healthcare continues to grow, adding 600 jobs in 2018, and other sectors have begun to grow as well. Growth was seen in construction, transportation and accommodations in the past year.

The Consumer Confidence Index  continued to be more positive than in the early years of the recession. The overall confidence was 56.9 which was slightly lower in Q4, but the survey was taken directly after the November 30 earthquake and Popp believes that the earthquake played a role in some people’s lower confidence in the last quarter of the year. Confidence in the local economy was 54.1, personal financial confidence was 66.2 and future confidence was 53.7.  All great numbers considering where the consumer confidence was a couple of years ago.

Business Confidence is also growing. The most recent report shows that confidence in the Anchorage economy is now at 57.5. The first time that it has been over 50 since 2014. Included in the survey were questions regarding barriers to growth and what was the most important thing for Anchorage’s economy. As has been the case for the past few years, business leaders are concerned about the stability of the State’s economy. The cost of health insurance ranked second, while the next three barriers all dealt with having a hard time hiring quality employees. For the fifth year in a row the item that was most important to business leaders was the need for a sustainable state budget, with 85 percent of respondents ranking that as a concern. Safety was the second highest response, with 73 percent.

Popp continued with the Anchorage Economic Forecast. AEDC is predicting that 2019 will be the year that Anchorage comes out of the recession. While the end is not recovery, it is a start. Population is predicted to remain flat and employment is expected to gain 300 jobs in 2019. More sectors are expected to move into the growth category or at least remain flat, rather than lose jobs.

Anchorage has a long way to go before we can consider ourselves recovered from this recession, but there are positive indicators in the above reports that show that business leaders and consumers are more confident in the economy than they have been in a few years. Only time will tell if 2019 is the year that Anchorage and the rest of the state are able to get out of the recession, but many experts believe that this is the year.

What does the future of Copper mean for Alaska & the world?

By Kieran Baker

According to the latest report in a new copper supply & demand outlook, by Fitch Solutions, global refined copper will grow steadily over the coming years, driven by demand from the power industry and rising electric vehicle (EV) production.

Fitch forecasts that global copper demand will increase from 23.6mnt in 2018 to 29 .8mnt by 2027, at 2.6% annual growth.

It makes sense that mining companies are searching worldwide for copper projects amid the forecasts that demand for the red metal will significantly outstrip supply from 2020; there are 300kg of copper in an electric bus alone and nine tonnes per wind-farm megawatt.

It seems like brown is becoming the new green.

All of the innovations designed to slow climate change by using alternative energy require one indispensable element: copper. It will take an estimated five times more copper for advanced systems, such as windmills and solar panels to generate electrical power; it will take more copper to develop and manufacture new battery technologies that store more energy, more copper is needed for efficient electric cars and appliances; and even more copper to bring our country’s power distribution up to date.

That’s a lot of copper.

Alaska has it.This green revolution also needs cobalt, which is an essential ingredient to optimizing the performance of batteries in the growing number of electric vehicles on global highways, yet essentially none of this battery metal is mined in the United States.

The US gets about 75 percent of its cobalt supply from overseas suppliers, with the rest coming from recycling. That is going to need to change if the US is to secure it’s own sources of critical metals; those countries with access to these essential natural resources will spearhead the next green hi-tech industrial revolution, dubbed the 4ID, as it brings together everything from the Internet of Things to robotics to artificial intelligence.

The good news is that there are a number of deposits and prospects in Alaska that could provide the United States domestic sources of cobalt, one, including the high-grade Bornite copper deposit at Trilogy Metal Inc.'s Upper Kobuk Mineral Project in the Ambler Mining District.

However, like climate change, we need to act fast, as the USGS’s annual survey of Mineral Commodity Summaries, last year, forecast that the rechargeable battery sector will drive the demand of cobalt even higher and potentially faster than the mining sector can get the supply of this key battery metal to market. 

This limited supply could affect U.S. carmakers such as Tesla Inc.’ and it’s not just EV’s that require these unique minerals: cobalt is needed in parts for aircraft turbine engines, in magnet appliances, missile guidance systems, radar and much more.

Trilogy Metals has been working in the Ambler mining district since 2004, and in 2011 it entered into a long-term cooperative agreement with NANA Regional Corporation Inc., across a 355,385-acre land package, which allows for a framework for exploration and development of this high-grade, polymetallic belt.

There is a conundrum here that is both ironic & important for the future of our planet; the need to balance out mining and the environmental consequences that come from that, with the need to access more copper & cobalt to power the necessary changes we need to make in order to get climate change under control. At least we can say that one advanced stage exploration project in Alaska, is looking into the potential of producing cobalt alongside copper, making America's 49th State the potential primary destination for the domestic source of these critical metals.

 

Kieran Baker is a journalist and a former Director of Business Development at ArcticToday.com

What does the future hold for the Alaska economy?

By Mouhcine Guettabi, 

The U.S. economy is convincingly in an expansionary phase, and is nearing peak growth rates for the current business cycle. Job creation has been consistently strong for an extended period, and unemployment rates have now returned to pre-recession levels. Recent stock market volatility has, however, raised questions about the near term outlook for the U.S. and other large economies. The health of the U.S. economy is important for Alaska not just because residents from other states visit Alaska, and purchase goods made in state but the state's most important financial asset - the permanent fund- is widely invested and therefore sensitive to nationwide shocks. During this national economic resurgence, the Alaska economy has experienced multi-year job declines and is in the midst of its longest recession to date. In fact the state was growing slowly even before the drop in oil prices. To be exact, between 2010 and 2015 the Alaska economy grew, on average, at 0.92%. Since the start of the recession, the state lost 1.82% of its jobs in 2016 and another 1.25% in 2017. The graph below shows our forecast between 2018 and 2025 for the state. It is important to note that we assume 60 dollar oil prices and only moderate state government employment reductions. Large budget reductions have the potential to change these outlooks drastically.

We expect employment to decline by 0.8% in 2018 and anticipate positive growth in 2019 equaling 0.793%. Between 2019 and 2025, we anticipate employment growth to average 0.68% per year. We also provide forecasts for Anchorage, Fairbanks, Juneau, and the Matanuska-Susitna Borough.

 

Anchorage:

We anticipate that the Anchorage economy will track the state as it has in the last decade:

Anchorage grew, on average, at 0.74% per year between 2010 and 2015. Since the start of the recession, Anchorage lost 1.909% in 2016 and 1.30% in 2017. The Anchorage economy is expected to evolve similarly to the state as a whole which is not surprising given that it represents half of the labor market. Specifically, we anticipate growth to average 0.64% per year between 2019 and 2025.

 

Fairbanks:

The Fairbanks economy is expected to outperform the state for the next few years:

Fairbanks grew, on average, at 0.29% per year between 2010 and 2015. Since the start of the recession, Fairbanks lost 1.58% in 2016 and 0.55% in 2017.We anticipate that the Fairbanks economy will outperform the state between 2019 and 2022 as a result of the boost of activity caused by the F-35 related construction. The average growth between 2019 and 2025 will be 1.062%.

 

Juneau

Due to its dependence on state government, we expect the Juneau economy to grow slower than the state average.

Juneau grew, on average, at 0.39% per year between 2010 and 2015. Since the start of the recession, Juneau lost 0.27% in 2016 and another 0.96% in 2017.We anticipate that the Juneau economy will grow slower than the state. Specifically, we expect the average growth rate between 2019 and 2025 per year to be 0.08%.

 

Matanuska-Susitna Borough:

Similar to the last decade, we anticipate that the Matanuska- Susitna Borough will continue outperforming the state.

 

Matanuska-Susitna Borough grew, on average, at 2.82% between 2010 and 2015. Since the start of the recession, the Matsu grew by 2% in 2016 and lost 0.343% in 2017.We anticipate that the Matanuska-Susitna Borough to continue outperforming the state. Between 2019 and 2025, growth will average 1.22% per year.

 

Please join us on January 9^th when a team of economists will discuss economic forecasts and the role of the permanent fund going forward. Click for more information.