State economist Neal Fried gave his 2013 economic forecast to a packed room of Anchorage Chamber of Commerce members at the Dena’ina Center Monday afternoon.
Donning his signature bow tie matched with a pink shirt and dark blazer, Fried began by joking how much he appreciates seeing “more bow ties than I have in a long time,” at the luncheon, before jumping into statistics showing how Anchorage’s economy is faring.
He characterized Anchorage’s economy as having “almost 24 years of uninterrupted growth.” Although the city lost around 900 jobs in 2009, they were recovered the next year, and in both 2011 and 2012, Anchorage’s economy saw a record number of jobs. That's starkly different than much of the U.S., which, although recovering from the recent recession, is still “way under water,” he said.
“There are very few states and places where they can actually say they have as many jobs as they used to, and very few that can say they have more jobs now than they ever had,” Fried said. “We are in a very, very different place. We don’t talk about recovery here.”
If Anchorage had also slid into recession, it would have lost about 11,000 jobs, he said. But instead, Anchorage continues growing. Last year was good for the city, with 2,000 jobs added. That’s double the number Fried had predicted, he pointed out.
Economy good, but for how long?
Yet risks for Anchorage's and Alaska’s economy remain. The major concerns Fried listed were oil production, low natural gas prices, declining federal funds, and oil prices.
Declining North Slope oil production has been a major issue for years. The Alaska Legislature is yet again debating whether to slash taxes on oil companies, a move championed by Gov. Sean Parnell to spur more production. Oil taxes and royalties fund about 90 percent of the state budget.
When questioned by a member of the audience, Fried shied away from predicting state oil revenues over the next decade. “I’m going to leave that to the experts,” he said. But he noted that “it’s probably the single biggest concern that we have about our economy."
"Although we aren’t the largest producer … we are still more dependent on oil production” than any other state, he said, save perhaps North Dakota. “That does make us more vulnerable.”
Fried said that high oil prices have “basically been bailing us out,” citing two solid years of oil prices averaging more than $100 a barrel. However, because of declining production, the state now needs prices to hover around $105-$108 a barrel to balance the budget. And he warned against assuming that prices will stay high.
His sentiments echoed the 2013 Economic Forecast produced by the Anchorage Economic Development Center (AEDC). “It is not clear how we can sustain that flow of revenue in face of steady declines in production,” the study said.
Fried also warned to expect a decline in federal funds to the state. The foreseeable decline was also called a “cloud on the economic horizon” by AEDC’s study.
The bright side
High commodity prices – from gold to fish to oil – are “wonderful things for us,” Fried said. He stated that they are the most important aspects boosting Anchorage's and Alaska’s economy. He also joked that when he sees high prices at gas stations in the U.S., “I’m happy,” as high oil prices means more revenue for Alaska.
“We do live in a pretty prosperous community,” he said of Anchorage, where the the median family income is $85,023, more than every other state. Alaska’s median family income is $75,786.
So how much growth will occur in Anchorage this year?
Fried said AEDC is predicting 1.1 percent growth, with 1,800 new Anchorage jobs in a variety of sectors, including health care (700 jobs), leisure and hospitality (500) and some growth in the transportation, petroleum and retail sectors as well. While construction projects should continue to help the economy this year, Fried predicted that the actual number of construction jobs will be flat, citing slowing activity by the U.S. Army Corps of Engineers on Alaska military bases.
Local and federal government jobs will drop by around 200 jobs, he said, continuing the decline in the government sector from 2012, largely due to Anchorage school district cuts.
• Anchorage inflation was 2.2 percent last year.
• “There’s a darn good chance” Anchorage will exceed 300,000 residents this year, probably by June, Fried predicted. There are two ways that communities grow -- by births or migration. Fried pointed out that the Matanuska-Susitna area north of Anchorage is one of the few places in Alaska where population growth was due more to migration than births. In the last 10 years, Mat-Su saw a net growth of 25,546 people due to migration, whereas Anchorage actually saw a few more people leave the city than move there. But Anchorage saw far more births, 38,805 for the same period. Mat-Su, by contrast, had 8,930 births.
• Most new housing construction in Southcentral Alaska is happening in the Mat-Su.
• About 40,000 people move in and out of the state every year, Fried said, and some years see a small gain or a small loss. In the last three years, however, more people have been moving in than out, due to the U.S. recession. “I actually expected more people to move up here,” he said. “Americans are just not as mobile as they used to be.”
• Overall in Alaska, both employment and population grows by about 1 percent a year, he said. “It’s amazing how strong those two things correlate in Alaska.”
Fried ended his presentation with his “good old Pick-Up Index.” In 2009, the number of pick-up trucks was declining in Anchorage but growing elsewhere.
“It did appear that we had truly become an urban community,” he said, and that Anchorage was “losing that Alaska edge.” But 2011 data shows that there are more pick-ups in Anchorage today than ever in the city’s history.
“So we are once again good Alaskans.”
Contact Laurel Andrews at laurel(at)alaskadispatch.com.