Moderate growth projected for Anchorage economy

mgokey@adn.comJanuary 6, 2014 

State labor economist Neal Fried predicts continued modest growth for Anchorage's economy heading into 2014.

Fried was the keynote speaker at a weekly luncheon hosted by the Anchorage Chamber of Commerce on Monday. His presentation followed on the heels of an annual economic trends report released Jan. 2 by the Alaska Department of Labor.

Bullish contributors to Fried's economic outlook include strong commodity prices, strong activity from the oil industry, healthy tourism and a recovering national economy.

Among the risks on the horizon: low natural gas prices, decreasing federal spending and declining oil production, which Fried noted has been a long-time bearish factor for the state.

Reductions in federal spending contributed to the loss of about 400 jobs in Anchorage, according to the new economic trends report. Federal spending drives about one-third of Alaska's economy, according to the report.

"We know that federal spending has been declining and probably will be in that mode for awhile," Fried said in his presentation.

"The federal government used to produce this great report every year on how much they spend on every state in the country," Fried said. "They stopped that in 2010, so we don't have an exact idea how much they spend here."

One proxy economists use is federal civilian employment, Fried said, where they've noted a decline.

"We haven't heard of any major lay-offs," Fried said, pointing to general attrition, which happens when workers retire and new hires are not enlisted to fill those vacancies.

While federal jobs and municipality jobs both suffered substantial losses in 2013, other sectors were growing.

Business/professional services, oil and gas and health care were areas of job creation in 2013.

"This is the headquarters for the (oil and gas) industry," Fried said. "When the numbers are in for 2013 we may have a record workforce ever for the state."

In 2013 there were 3,784 Anchorage residents working on the North Slope. "We have over a thousand more people living (in Anchorage) working on the slope than in 2005, that has a significant effect on our economy."

"When you add all that up we get more moderate growth," Fried said.

Over the past 10 years job growth in Anchorage has averaged just over 1 percent per year, with highs of 1.7 percent in 2005 and 2012 and a low of -0.6 percent in 2009.

While final numbers aren't in for 2013, preliminary estimates show job growth was around 0.4 percent for the year.

Fried's estimate for job growth in 2014 was 0.2 percent.

Fried, true to his profession as an economist, showed the luncheon his accuracy rate for predicting job growth over recent years. By and large Fried's estimates were fairly close to actual jobs numbers, seldom deviating by more than a single percentage.

Lee Leschper, vice president of Morris Communications, said slow and steady growth has been a longtime strength of Alaska's economy.

"We don't need to be a part of this boom and bust cycle," Leschper said.

Alaska's natural resource wealth means the state doesn't have to deal with the roller coaster of ups and downs the rest of the world deals with, Leschper said.

Leschper also added that the decrease in federal spending in Alaska wasn't necessarily a bad thing, pointing to a decreased dependence on the federal government in the long run.

The city's unemployment numbers continue to be below the national average, according to a report released on Monday from the Anchorage Economic Development Corp.

AEDC report pegs the city's unemployment rate at 4.9 percent at the end of November 2013, down 0.7 percent from the same time in 2012.

"Anchorage's 2013 annual unemployment rate is expected to be under 5 percent, which is well below the national rate of 7 percent and the statewide rate of 6.5 percent," Bill Popp, AEDC president and CEO, said in a prepared statement.

Like the Department of Labor report, AEDC's report showed job losses stemming from the federal and local government sectors. Both reports showed growth coming from the private sector.

The Great Recession wasn't felt as profoundly in Alaska as it was elsewhere in the country, Fried explained during his presentation.

Six years after the recession, Alaska has more jobs than it's ever had, Fried said. Only three other states -- North Dakota, Texas and Louisiana -- fared better during and after the slump.

"We really started touting our unemployment rate back in 2008 when it dropped below the nation's for the first time in history," Fried said. Anchorage's sub-5 percent unemployment rate is what Fried called indicative of a "pretty tight labor market."

Other highlights from the Labor Department's annual economic trends forecast on Anchorage include:

• Since 2002 health care employment has grown at a pace of almost 5 percent per year, versus 1 percent for overall employment. Health care generated approximately 200 jobs in Anchorage last year.

• Cuts in federal spending cost Anchorage approximately 400 jobs in 2013. Federal spending drives about a third of Alaska's economy, according to the report.

• Employment in local government fell by 400 jobs in last year with additional job losses forecasted as the Municipality of Anchorage continues to downsize its workforce. Anchorage School District lost 500 jobs in 2013, attributed to tighter budgets and falling enrollment.

• Despite declining oil production, jobs in the oil industry are up. ExxonMobil's Point Thomson project generated considerable employment in 2013 and will likely continue to do so into 2014.

• Building permit valuation in the city was up by 40 percent in 2013, the highest since 2007.

The complete 2014 economic trends report can be found online at labor.state.ak.us/trends/.

 

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