Alaskanomics

Alaska Economic Update - May 2021

By Mark Edwards, EVP - Chief Credit Officer & Bank Economist

2020 was a challenging year for the global economy as health policies led to significant disruption in normal business activity. It is counter-intuitive to have a year where payroll jobs declined by 8.5% and gross state product fell 5% in Alaska, yet per capita income rose over 3% and housing prices and sales activity increased substantially.  This was only possible because billions of dollars in federal stimulus money reached Alaska and helped support businesses and individuals through the most challenging times. Record low interest rates and low levels of building activity also contributed to home price increases. 

Oil prices were shocked much lower at the beginning of 2020 at the height of the virus fears and low level of travel activity.  However, as the year progressed, oil prices returned to a more stable level and oil production levels in Alaska also followed a similar path.  The demand for energy increased as the transportation and tourism sectors accelerated.

March 2021 employment data from the Alaska Department of Labor shows a 6.9% reduction in total payroll jobs, a decline of 21,900 jobs compared to March of 2020.  Leisure and hospitality was hit hard from travel restrictions, down 23% year over year, a loss of 7,200 jobs.  Direct Oil and Gas jobs fell 36% or 3,600 jobs. A decline in public education positions led to a 2,000 job decrease in local government. Transportation, Warehousing and Utilities declined 10% or 2,000 jobs since last March. Professional and Business Services has also been negatively impacted, down 9% or 2,500 fewer positions.  According to the Labor Department report, State Government was the only sector to grow year over year.  The 1% or 200 job increase was attributed to hiring people for contact tracing and to process unemployment insurance claims.  The level of unemployment claims in the second week of March was 5 times higher than the same week in 2020.

Alaska’s real gross state product (GSP) was $52 billion in 2020, compared to $55 billion in 2019, according to the Federal Bureau of Economic Analysis (BEA). The U.S. GDP declined 3.5% in 2020.  Alaska’s reduction was 5% and the worst state was Hawaii at 8%.  Both states were more negatively affected by travel restrictions reducing tourism.  Alaska’s GSP declined sharply by 34% due to COVID-19 in the second quarter of 2020, but then grew by 32% in the third quarter.  This is very similar to the nationwide economic swing in production. Alaska’s largest GSP declines in 2020 came from Transportation and Warehousing, followed by Accommodation and Food Services, Oil & Gas and Health Care.  All of these sectors showed positive recovery in the 4^th quarter of 2020 in Alaska, helping place it 9^th fastest growing for the quarter of the 50 U.S. states.

Alaska’s seasonally adjusted personal income for 2020 was $47 billion compared to $46 billion in 2019, according to a report released by the BEA.  Personal income in the U.S. in 2020 increased 6% and Alaska rose 3%.  In a typical year, the majority of personal income is derived from wage earnings.  Additionally, some people receive government transfer payments, such as social security, Medicare and Medicaid. Personal income is further supported by earnings from dividends, interest and rents.  However, in 2020 earnings from wages and investments decreased in Alaska. The U.S. growth was entirely from a net $1.1 trillion increase in government transfer payments.  About half of the transfer payment increase was from unemployment insurance. Direct stimulus payments accounted for a large part of the remainder.

Per capita income in the U.S. was $59,700 compared to $64,800 in Alaska.  This placed Alaska as the 9^th highest income of the 50 U.S. states.  In Alaska, earnings from wages decreased 1.5% or $435 million in 2020 and investment income fell 1% or $65 million.  Government transfer payments however, rose 24% or $1.9 billion over 2019 levels.  By far the largest drop in wage earnings came in Accommodations and Food Services, followed by State and Local Government and Oil & Gas.  There were positive increases in wages in the Professional and Technical Services Industry and Health Care.

The price for Alaska North Slope (ANS) crude oil had monthly averages in 2018 and 2019 ranging from $59 to $80 a barrel. Prices fell quickly at the beginning of 2020, responding to fears that COVID-19 would devastate the global economy and reduce the demand for travel.  The low month was April when ANS averaged $16 a barrel.  However, by June the oil markets stabilized and for the last six months of the year the average monthly price remained between $40 and $50.  In the first three months of 2021, the monthly average has climbed from $56 to $66.

Alaska’s crude oil production averaged 485,000 barrels per day (bpd) in fiscal year (FY) 2020, which ended in June.  This was a decrease of 4.8% compared to the previous FY end.  The State Department of Revenue forecasts production on the North Slope to increase by nearly 1% in FY 2021 to 489,000 bpd.  The average production for the first quarter of 2021 has been higher than the forecast.

Alaska’s home mortgage delinquency and foreclosure levels continue to be better than most of the nation.  According to the Mortgage Bankers Association, the percentage of delinquent mortgage loans at the end of 2020 in Alaska was improving to 6.2%. However, this is still significantly higher than 2.9% at the end of 2019 before the effects of COVID impacted the market.  The comparable delinquency rate for the entire country was higher than Alaska at 7.2% at the end of 2020, compared to 4.1% at the end of 2019.

The Mortgage Banker’s survey reported that Alaska’s foreclosure rate was 0.45% at the end of 2020.  This is an improvement from 0.63% at the end of 2019.  The comparable national average rate was slightly higher than Alaska at 0.56% at the end of 2020, and 0.78% at the end of 2019. This is somewhat misleading because the federal moratorium on foreclosure activity on occupied homes led to declining numbers, even though job loss strained the economy and borrower’s ability to pay.

Many people across the country took advantage of mortgage forbearance plans available from lenders to delay payments or pay interest only on their homes.  Until they catch up on past due payments these loans will appear delinquent because they are still behind according to the original terms of the mortgage.

According to the Alaska Multiple Listing Services (MLS), the average sales price of a single family home in Anchorage rose 5.9% in 2020 to $397,000.  This is following increases of 0.5% and 2.3% in 2019 and 2018, respectively.  Average sales prices in the Matanuska Susitna Borough rose 9.9% in 2020, continuing a decade of consecutive price gains.  These two markets represent where the vast majority of Northrim’s residential building activity occurs. 

The low interest rate environment has been a major factor in rising prices.  According to the Federal Reserve Bank of St. Louis, the average 30 year fixed rate mortgage in the U.S. hit all-time record lows last year.  Rates began 2020 at 3.7% in the first week of January and fell one percent to 2.7% by the end of the year.  Rates began to rise in the first quarter of 2021 and finished March at 3.2%. However, in April they declined slightly to 3%.

The number of units sold in Anchorage was up significantly in 2020 by 19.5%, climbing from 2,719 homes sold in 2019 to 3,249 last year.  The main difference was a record number of sales occurred in the last quarter of the year, when sales activity typically declines in the winter. The Matanuska Susitna Borough also had strong sales activity, up 9.7% in 2020 to 2,135 units sold compared to 1,946 in 2019. The Mat-Su also had stronger than normal sales in the second half of 2020. 

In Alaska, the number of building permits issued for new home construction were 1,680 in 2019.  According to the U.S. Census Bureau this fell 15% to 1,420 housing units in 2020.  This does not include building in unregulated parts of the state.    

Across the country, the prosperous baby boomer population is living longer and often keeping a second cabin or vacation home.  This housing inventory is not turning over at the expected rate, as the even larger population of millennials are finally becoming home owners.  The Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac, determined that the nation was undersupplied by about 2.5 million homes pre-COVID.  Now that has grown to 3.8 million homes in April of 2021.  The high cost of building has constrained construction levels and also made the price of a new home out of the reach of hundreds of thousands of first time homebuyers.

Inflation is generally caused when there is an increase in the money supply that outpaces economic growth. Trillions of dollars in COVID-related deficit spending expanded the money supply and diluted the value of existing money. Spending on a home mortgage or rent is the largest expense for consumers.  The rapid rise in home prices across the nation in 2020 will be a large inflationary force.  The second largest consumer expense is energy for home heating and transportation.  The energy index rose 13% year over year through March of 2021. The increase in oil prices have been good for the Alaska economy, but are a major part of rising inflation figures.  Across the board there are signs of rapidly rising prices of most commodities. 

The Consumer Price Index or CPI rose 2.6% between March of 2020 and March of 2021.  For the first quarter of 2021 the CPI increased 0.9%.  This was the largest first quarter increase in 13 years. The index rose 0.6% this March alone, which was the largest single monthly increase in the last 9 years.  This acceleration in inflation will be one of the most important economic indicators to track in 2021.  Since the 2008 recession, Americans have benefited from a prolonged low inflation environment, averaging only 1.7% a year over the last 12 years.  2% is the Federal Reserve’s long-term target rate for inflation. Many economists feel sustained inflation over 3% will be problematic for the economy unless GDP growth also accelerates concurrently.

Supply chain disruptions have slowed the pace of economic recovery.  Most impactful is the dramatically lower level of workforce productivity due to millions of workers losing their jobs.  Trade with our leading partners Canada and Mexico has been affected by cross boarder restrictions slowing the supply of many goods and raw materials.  Numerous companies did not have sufficient IT infrastructure in place to quickly react to a work-from-home scenario.  Government permitting and regulation approval took longer than normal in many instances. Significant storms, such as the one that hit Texas hurt chemical production and other manufacturing.  Cargo shipping had embarrassing setbacks.  These and other factors resulted in high commodity prices and low product availability throughout the world.

The economic roller coaster of 2020 was not a normal business cycle.  It was created by governments around the world forcing millions of businesses to close or seriously constrain business activity.  The economy was also rescued by massive deficit spending that reached consumers and businesses quickly to stop a serious problem.  Recent news suggests the Biden administration is preparing to increase taxes to help pay for the record deficits.  Typically, this is a drag on the economy and lowers future investment.  Therefore, more than ever, to predict where the economy is going in the coming year will depend on the policies government officials enforce on taxes, health regulations, and monetary policy.

An economic rebound is definitely occurring, it is just slightly disorganized.  Abundant cash should continue to drive consumer spending and force companies to work out kinks in the supply chain to meet a growing demand for goods and services.  Trillions of dollars in federal stimulus money is providing much needed relief to millions of Americans impacted by COVID regulations.  Excess cash is also driving investment into the stock market and leading to a slow recovery of jobs.  However, it has also created inflation by expanding the money supply and diluting the value of existing money. 

This is putting upward pressure on interest rates as investors want to maintain a “real” rate of return after factoring in the effects of inflation.  The yield curve is still flat and near record lows for maturities less than two years.  However, it is getting steeper for medium and long term rates. The five year U.S. Treasury rate has increased a half percent in the last year.  The 10 and 30 year Treasuries have both increased slightly over 1% since April 30, 2020.

Fears of higher taxes to pay back the large deficit spending is also dampening the enthusiasm of investors and led many to question if this short-run economic growth will be sustainable. At least for the near term, it appears the massive liquidity in the financial system should spur on an economic rebound.  Government health regulations, changing tax rates, and monetary policies will be the largest variables impacting inflation, interest rates, and the stock market in 2021.  There will undoubtedly be more unexpected economic challenges to come.  However, companies that are nimble in a changing environment; well-prepared to meet technological and distribution challenges; and have financial resources available can still succeed in these challenging times.

                                                                                                                                                Mark Edwards

                                                                                                                                                May 4, 2021

 

 

References:

https://www.bea.gov/

http://almis.labor.state.ak.us/

http://www.tax.alaska.gov/programs/oil/prevailing/ans.aspx

http://www.tax.state.ak.us/

www.mba.org

https://www.alaskarealestate.com/MLSMember/RealEstateStatistics.aspx

https://fred.stlouisfed.org/series/MORTGAGE30US

Standard Time.

December and January Employment Numbers

Employment numbers from the Department of Labor and Workforce Development show that while December employment was down and estimated 0.3 percent from December 2017, January employment rose an estimated 0.2 percent from January 2018.

During the month of December, Alaska lost about 900 jobs, with retail, manufacturing, and professional and business services each losing 400 jobs. Health care continued to add jobs, with an addition of 400 jobs to wrap up the year. Alaska’s seasonally adjusted unemployment rate was 6.3 percent in December. This is higher than the national average of 3.9 percent.

In January, Alaska gained 500 jobs. The biggest increase can from construction that added 800 jobs over January 2018. Health care continues to grow, with an addition of 400 jobs. State government, oil and gas, transportation, warehousing, and utilities, and local government all added jobs in the first month of the year.

Alaska’s seasonally adjusted January unemployment was 6.5 percent, a little higher than December’s rate. Not-seasonally adjusted rates rose in all areas of the state, other than Aleutians West and East, which had the lowest rates due to winter fishing. Skagway and Denali had the highest rates in the state at 21.6 and 21.2 percent, which is normal due to the off-season for tourism. Anchorage and Juneau had lower rates than the state’s average, which Fairbanks was just over the state’s average.

 

Full employment data can be found at http://live.laborstats.alaska.gov/labforce/

 

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.

November Employment

November employment was down 0.4 percent from 2017. That equals roughly 1,300 jobs. Retail had the largest loss of jobs with over half at 700. Professional and business services and manufacturing each lost 500 jobs. Health care continues to add jobs with an additional 500 jobs over last year. Transportation, warehousing, and utilities and construction both had gains with 300 and 200 respectively.

Alaska’s seasonally adjusted unemployment was 6.3 percent in November. This is down one-tenth of a percent from October. This is still well above the national average, which was 3.7 percent in October.

Not-seasonally adjusted rates were higher in nearly every borough and census area, which is normal this time of year. Denali and Skagway rates doubled between October and November, which is common due to their reliance on tourism. Some areas had rates below the state’s average. Aleutians East Borough and Aleutians West Census area were still low with 5.1 and 4.5, respectively. Even though fishing is dying down for the season, these areas still had low rates on average. Sitka, Juneau and Anchorage all had rates well below the state’s average with 4.0, 4.6, and 5.1 percent respectively.

For full employment numbers, visit the State of Alaska's page.

Cost of Living in Alaska

Throughout Alaska’s history, the cost of goods has been much higher than the rest of the country.  As noted in the July issue of Alaska Economic Trends, during the Klondike Gold Rush a pound of canned butter was $5, or $142 in today’s dollars. While the price of butter has improved, the cost of living, especially in rural Alaska, remains a significant challenge for many. Alaska Economist Neal Fried explains that there are two ways to measure the cost of living. One is to examine the differences between places at a single point in time, and the other is to look at price changes in a single place over time.

Anchorage is the only city in Alaska with its own Consumer Price Index (CPI), and therefore is the only true measure of cost over time. This can be tricky because cost in Anchorage often does not reflect cost in other communities, but the measurement of price change is usually close to that seen in other communities. In relation to price changes, 2014 was a good year. It was the second-smallest increase in the past ten years. Price changes can only be used to compare prices in the same place over time. You cannot compare a Consumer Price Index between cities. Anchorage is the smallest city, of 27, to have its own CPI, and is used as the de facto measure of inflation in Alaska.

It should come as no surprise that Anchorage residents spend the bulk of their monthly budget on housing. Anchorage residents typically spend over 40 percent of their budget on housing and in 2014 the average cost increased by 2.7 percent. Housing price does include the cost of energy and is therefore more volatile. The Anchorage cost is likely much different from communities outside of Southcentral Alaska because many Anchorage residents use natural gas to heat their homes. The price of natural gas is far more complex than the price of heating oil and gasoline, which is used outside of the Southcentral region.

Housing prices in Alaska vary widely depending on the region. Anchorage has the highest average cost for a home at $360,965, while the statewide average is $306,042. Rent for a two-bedroom apartment is the highest in Kodiak, where the average is $1,420 a month. Anchorage is second with $1,331 per month.

Health care does not comprise a large part of the index, but has seen significant increases in the past decade. The cost of health care in Anchorage increased by 3.2 percent in 2014, the largest increase in all categories in the index. Alaska has the highest health insurance premiums in the nation. This is because of higher hospital costs, much higher physician reimbursements, and the higher cost of doing business in Alaska.

Alaska cities are expensive, but not the most expensive in the nation. 11 cities topped Alaska’s most expensive city, Kodiak, in 2014. According to the Council for Community and Economic Research (C2ER), Manhattan and Honolulu are the most expensive cities to live in. Alaska ranked fourth in states with the highest cost of living, behind Hawaii, Connecticut and New York. A few examples of how Alaskan cities compare to others in the nation are:

• National average for a pound of banana $.59, Anchorage $.88, Kodiak $1.26
• National average for a pound of coffee $4.49, Anchorage $5.87, Kodiak $6.09
• National average for a doctor’s visit $105.03, Anchorage $169.40, Fairbanks $173.50
• Cheapest Quarter Pounder Pittsfield, MA $1.99, Anchorage $4.65, Most Expensive Hilo, HI $5.02

The cost of living is a large factor for many when choosing where to live. Anecdotally, Alaska is very expensive, but we can see that it is not the most expensive location in the nation. While Pittsfield, MA may have cheap Quarter Pounders, you can bet that they do not have to share their drive thru with moose and bears as you can in Anchorage.

For more information on the cost of living in Alaska and other cost measures, visit: http://labor.alaska.gov/trends/

Unemployment in March at 6.5 Percent

The Department of Labor and Workforce Development released the March unemployment rate early this morning. The rate for March was up slightly from February and stands at 6.5 percent. The national average remained steady at 5.5 percent.

The not -seasonally adjusted lowest and highest rates in the state remained the same with the Aleutians East Borough and Aleutians West Census Area being the lowest at 3.2 and 2.6 percent respectively; and Wade Hampton Census Area the highest at 26.6 percent.

As part of their monthly press release, the Department highlighted the job numbers of the different regions throughout Alaska for the 1^st quarter of 2015.

• Anchorage’s retail trade was the biggest source of new jobs, while professional and business services had the largest losses. The lack of snow cut into winter recreation, which created weakness in the leisure and hospitality industry.
• Southeast jobs were lower than the same period last year due to the less-than-usual growth in construction and seafood processing.
• Southwest was also lower than last year even with the seasonal growth from winter fishing.
• The Gulf Coast saw gains in seafood processing, mining, and leisure and hospitality that balanced out the loss in health care and government jobs.
• The Interior, including Fairbanks, had a small loss in jobs, but health care in the region is growing.
• The Northern Region had an increase in jobs from the same period last year. Health care increased, as did local government.

For full employment statistics, visit www.laborstats.alaska.gov

Governing Alaska in a Time of Low Oil Prices

Commonwealth North hosted Governor Walker at lunch on Wednesday to hear his vision for Alaska and the status of important issues concerning the state budget, natural gas pipeline, and Medicaid expansion. The Governor kept his introduction light and tried to warm-up the crowd. He seemed to want to maintain a sense of optimism throughout his presentation. He outlined the cabinet retreat that was held after his election to set priorities for the administration. The cabinet walked away from the retreat with a mission statement, core values, and a vision for the Governor’s term in office. At the heart of the three sections was how to improve the lives of all Alaskans.

Getting into the meat of his presentation, Governor Walker discussed his actions regarding LNG and the state. He reassured everyone that his priority is getting Alaska LNG to market. The work done by the Parnell administration and the companies working on AKLNG is the priority, but the Governor is not comfortable moving forward with only one option in the LNG field. He noted that if there is only one project being worked on, negotiations will be very difficult and he would like to leave his options open for getting Alaska’s gas to market. Many times throughout the presentation, Governor Walker reiterated his desire to have a viable solution to the natural gas issue. The work being done by the Alaska Stand Alone Pipeline (ASAP) is not to be seen as competition to AKLNG, rather as a backup. It is not a new project, rather one that was started in 2010 and the Governor feels it is a viable option for the future.  

Governor Walker then switched gears to Medicaid expansion and reform. He hopes that the Medicaid bill will get through the Legislature before the end of the session, as he believes the expansion is vital for the health of uninsured Alaskans. There would be significant savings on the cost of health care and lead to a reduction in uncovered health care costs and other social problems.

Even with the fiscal and policy issues being faced by the state, Governor Walker felt that there was a silver lining, and that was the fact that we can make the necessary changes to the way government functions in Alaska, in relation to the state budget. The spring forecast will be released and while it will not be good news, it should not be a surprise to anyone. The Governor stated that when it comes to the budget, it is a back and forth process. It is not pleasant, but it is absolutely necessary. He continued by saying that a reduction in spending is necessary before going to citizens for revenue sources. When it comes to budget cuts, everything will be on the table and will be carefully reviewed for the best possible outcome.

It was clear that Governor Walker wanted to remain optimistic about future of the state. He noted that Alaska is full of opportunity and was told last week that Alaska doesn’t have a wealth problem, it has a cash flow problem. Alaska is rich with natural resources and we must determine the best way to get the resources to market. The Governor has a tough road ahead and seems to be up to the task, but only time will tell what the future holds for Alaska. The deficit must be dealt with soon because the longer it goes unchecked, the harder it will be to solve. Governor Walker is willing to put in the work and seems confident that the Legislature is also ready to do what is best to improve the lives of all Alaskans.

AEDC Economic Forecast Luncheon

Anchorage Economic Development Corporation (AEDC) hosted its annual Economic Forecast Luncheon on February 5^th. The sold-out crowd of 1,600 business professionals heard from Mayor Dan Sullivan about the upcoming Centennial events in Anchorage. Bill Popp, President and CEO at AEDC then gave his 2015 Anchorage Economic Forecast presentation.

A survey of business leaders in Anchorage found that most were still optimistic about parts of Anchorage’s economy, but overall confidence in the economy had dropped and was slightly pessimistic as compared to years past. This year was the first time the confidence had dropped below 50 percent since 2010. The barriers for growth come as no surprise, with 77 percent of respondents saying the state economy is as large barrier for economic growth. Availability of a professional/technical workforce is also a large barrier, as well as the national economy. The changes to health insurance laws and the cost of labor round out the top concerns for local business leaders. In short, businesses feel good about where they are and what they are doing in 2015, but do not have the same optimism for the economy as a whole.

A brief recap of the 2014 jobs situation outlined that counter to predictions, Anchorage saw a net decrease of 400 jobs in the past year. There may be some revisions of the final numbers, but 2014 was definitely not what was predicted for jobs.

The prediction for 2015 is as follows:

• Oil and Gas- decline -100
  • There are still 15,000 statewide oil and gas industry jobs and the small decline does not reflect projects being cancelled, only a shift from 2014 staffing
• Health care- growth +300
  • continues to be a growing field in Anchorage
• Transportation- flat +0
• AEDC feels there could be a small bump in transportation in 2015 because of air cargo, but will wait to see if the climate remains positive for Alaskan transportation
• Professional and business services- flat +0
• Construction- decline -100
• there has been positive growth in Anchorage construction, but capital projects are decreasing, which will have an effect on the overall construction jobs number
• Leisure and hospitality- growth +100
• Retail trade- growth +300
• continues to be strong due to national retailers entering Anchorage as well as local businesses increasing their footprint
• Financial activities- decline -100
• Government- decline -500
• we will continue to see a decline in Federal jobs in Anchorage, but state government will account for a good portion of the decrease predicted
• Other sectors- growth +100
• Overall- flat +0

Everyone in the room was well aware of the issues with the state’s budget but as both Mayor Sullivan and Bill Popp noted, Anchorage’s economy is strong and this drop in oil prices is much different from the crash in 1986. Anchorage will not see a significant drop in jobs and in fact, the private sector should increase by 500 jobs this year.

We all know that much depends on oil prices and future production as well as the 2016 state budget. Alaskans need to understand that there is a lot of work to be done to build the state economy and that difficult decisions will need to be made by Governor Walker and the Legislature. This is a serious issue, but solutions for increasing revenue and curbing spending are out there. The solutions are long-term strategies and require a good, hard look at the state’s budget process for both revenue and spending.

A midyear look at the employment numbers will be provided at AEDC’s summer luncheon. For the full reports and slide show from the forecast luncheon, visit http://aedcweb.com/2015-economic-forecast-luncheon-reports-available/

Alaska Economic Trends: 10-Year Forecast

The Alaska Department of Labor and Workforce Development publishes a monthly magazine, Alaska Economic Trends. In October, the focus was a 10-year forecast of industries and occupations. In her opening, Department Commissioner Dianne Blumer highlights that Alaska is expected to gain more than 36,000 jobs by 2022. This will increase the state’s total job count to more than 370,000. In the projections, health care and mining jobs will have the largest increase with 25 percent and 24.8 percent, respectively.

The projected gain of just over 36,000 jobs by 2022 is a 10.8 percent growth rate for Alaska. This follows the projected population growth of 10 percent during the same period. The health care industry will see the largest increase of jobs due to the increasing age of Alaska residents. Between 2012 and 2022, the number of Alaskans who are 65 or older will increase 79 percent.

The mining industry, minus oil and gas, will be right behind health care in job growth. The expected increase of 24.8 percent will be due to higher-than-average mineral commodity prices and the expansion of existing mines. Many existing mines are expected to grow and there are multiple projects in various stages of permitting and planning. Because of the volatile nature of the mining industry, experts are not able to predict which projects will move forward and there could be significant changes to the forecast depending on mineral prices.

Not only are jobs expected to grow by 36,000 before 2022, there will also be 95,000 jobs that will need to be filled due to employees retiring or changing jobs. As noted earlier, the number of people over 65 will increase significantly in the next 8 years. In comparison, the number of people under 65 will only see a 3.6 percent increase. This will put high demand on healthcare jobs and related services as the population ages.

Alaska Economic Trends gives specifics in a variety of industries and occupations and expands on the forecast through 2022. The full issue can be viewed at http://labor.alaska.gov/trends/oct14.pdf

ISER Report on Health-Care Benefits: A Survey of Alaska Employers

The Alaska Health Care Commission contracted with the Alaska Department of Labor and the Institute of Social and Economic Research (ISER) to determine what is happening to employer-sponsored insurance in Alaska. Nationwide, the number of employers providing insurance is dropping and Alaska is facing premiums that are 30 percent above the US average. To determine the current state of employer sponsored insurance in Alaska, Mouhcine Guettabi, Rosyland Frazier, and Gunnar Knapp of ISER analyzed the survey results and found the following:

• Two-thirds of Alaska businesses don't provide health insurance, and the reason they cite most often is no surprise: it's too expensive.

 • The share of businesses providing insurance varies a lot among small and large firms. Almost all firms with more than 100 employees provide health insurance, compared with less than 24% of the smallest firms (those with fewer than 10 employees).

 • About 35% of employees at firms covered by the survey work part-time or seasonally, but very few of them have employer-based insurance. Full-time employees account for 95% of the employees carrying health-insurance through their employers, while part-time and seasonal workers make up only 5%.

 • Some businesses that provide insurance, especially the largest, are taking steps they hope will help hold down insurance costs. Close to 40% of the largest firms offering insurance have established wellness programs for their employees and nearly 30% are providing employees with comparative information on the cost and quality of services at different medical facilities.

The full report can be found at http://www.iser.uaa.alaska.edu/Publications/2014_10-AKHealthBenefitsReport.pdf.

There is also a summary report at http://www.iser.uaa.alaska.edu/Publications/2014_10-RS079-AKHealthBenefitsSummary.pdf

Both are great resources in the search for information regarding health-care in Alaska.