With Alaska facing a possible recession brought on by persistently low oil prices and a deep cutback in state spending, its largest city is coming to grips with a looming reduction in Army troop levels that could create more problems for the job market and greater economy.
Effects from the Army's decision made public Wednesday to cut 2,600 troops from Joint Base Elmendorf-Richardson will ripple out from areas with a high proportion of military residents, such as Eagle River and northeast Anchorage, to the municipality as a whole, economists predict.
"It's going to take a big chunk out of the Anchorage economy," said Scott Goldsmith, professor emeritus of economics at the University of Alaska Anchorage Institute of Social and Economic Research.
In strip malls lining Boniface Parkway, down the road from the base, emotions among business owners ranged from anxiety to stoic acceptance.
Linda Kimball, co-owner of Good Friends Barber Shop, anticipates business will take a big hit.
Judging from her decor alone, it's no surprise that 90 percent of Kimball's customers have military ties. Frames filled with patches deck the walls and an American flag, once flown in Afghanistan by an Army medevac crew and now neatly folded in a glass case, is on prominent display.
"We're trying to ignore the reduction right now," said Kimball, who cut hair at the barber shop on base before starting her own business four years ago.
Jeremy Wise deals in new and used Army gear as owner of the 907 Surplus store, with most of his customers consisting of soldiers transitioning to and from the field. Inventory ranges from items that are not specific to the military, such as sleeping bags and instant camping meals, to more specialized equipment including sniper face veils, helmets and plastic Army-green canteens.
"I will really be affected, but it is what it is," said Wise, a father of three who served in the Army for eight years. "It won't shut me down. We will find better ways to sell to civilians, with more ads and more marketing."
There are still many unknowns. Anchorage School District Superintendent Ed Graff said he had little sense of how classrooms would be affected because, he said, it was too early to tell. John MacKinnon, executive director of Alaska General Contractors, said impacts to the industry would occur, but not right away.
The troops and their dependents make up about 2 percent of Anchorage's population and account for roughly $140 million in payroll, said Bill Popp, president and CEO of the Anchorage Economic Development Corp.
At least 80 Army civilian positions on base, representing about $5 million in payroll, are also slated to be eliminated, Popp said.
"A large part of those salaries are spent on-base and not in the broader economy," Popp said. "But what is spent off-base is not inconsequential."
Real estate receives a significant share of spending by troops, who receive generous housing allowances if they live off-base. But the extent to which that market will be affected is unclear.
Weidner Apartment Homes, Alaska's largest owner and operator of residential rentals, owns four buildings in which military personnel make up an average of 60 percent of total occupancy, said spokesman Greg Cerbana.
He said renters from the Air Force and Army combined account for about 9 percent of Weidner's portfolio in Alaska. Weidner does not know exactly how many military renters it will lose, but given the city's low vacancy rate, they could be replaced, he said.
In the near term, Weidner has no plans to change its business strategy or presence in Anchorage.
"We're pretty bullish on Anchorage and we think there's a lot going on here, so we would characterize this as a setback, but not anything the community can't recover from," Cerbana said.
The drawdown will likely bring troop levels in Anchorage to about 9,000. That was the rough size of the force two decades ago, before the Sept. 11, 2001, terrorist attacks unleashed a wave of defense spending. As with other economic forces, the bases operate in cycles. In 1994, officials were bemoaning the loss of 2,000 troops when the Army cut part of a light-infantry division from Fort Richardson.
But key economists are not optimistic about Anchorage's ability to absorb the loss. Goldsmith noted that overall employment would likely take a hit and, given the state's other economic challenges, could very well go into the negative-growth mode that over the long term signals a recession.
He predicted a loss of up to 6,000 jobs as a result of the drawdown over the two years it is slated to occur. That's because jobs in base supply, construction and other civilian industries will also be casualties.
"It's a pretty dramatic cut in overall employment," Goldsmith said. "It's hard to see a scenario where there's enough growth in employment in other sectors to offset this hit. It's pretty clear we're going into negative employment and a year or two of negative employment would mean a recession. I don't know that there is a silver lining to it."
The cutback "certainly could slow us down even more," said Neal Fried, an economist with the state Department of Labor. "It's certainly going to make it harder for the employment numbers to remain on the plus side. At least in the near term, it's going to be hard to make up these jobs."
Popp's outlook is more optimistic.
"We think it's a bad decision on the part of the military, but at the same time, it could have been much worse," he said. "I think it's going to be a pinch, but it's not a death blow to the Anchorage economy."
Popp sees an opportunity for local businesses to try to recruit soldiers after they depart Army service.
"These are friends and neighbors," he said. "We don't want to see them leave."