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Three-year forecast finds the bright side in Anchorage's dim economy

With economic worry rife in Alaska, the annual three-year outlook luncheon hosted by the Anchorage Economic Development Corp. was a popular affair on Wednesday, with a sold-out crowd of 1,500 and apparently few no-shows at the Dena'ina Center.

AEDC President and CEO Bill Popp didn't shirk from delivering some unpleasant news to the business community: 27 years of steady economic growth in the city came to an end in 2015.

But as steward of Alaska's economic center, Popp also aimed to ease consumer jitters in the face of this uncomfortable fact and put some shine on the popular outlook, which skews toward the pessimistic, given poor prospects for oil prices crossing the $50-per-barrel mark and lawmakers' failure to agree on a plan to reduce the state's $4 billion deficit.

Officials from Providence Alaska Medical Center, Alaska Regional Hospital and others in the growing field of health care were there, but it was Popp who perhaps deserved an award for best bedside manner.

"There is no doubt, we are going to feel some significant pain in next couple of years. But by no means is the Anchorage economy headed for a disastrous time like the 1980s," said Popp, speaking of the worst recession in Alaska's post-oil history. "Think of the downturn we face as more of a pinch than a punch to the economy. It's going to hurt and it's going to leave a mark. But it's not going to be a knockout blow."

He delivered bad news about recent and projected job losses, a slowing housing market, low consumer confidence and a falling population, but framed the statistics in a mostly positive context.

He said the cap on Permanent Fund dividends at $1,000 per resident would not cause a loss of "thousands and thousands of jobs." This year's expected payout is slightly higher than the amount Alaskans received in 2013, and Popp pointed out that although dividends have grown in the two years since, businesses that typically benefit from consumer spending of the PFD, like retailers and restaurants, have not added thousands and thousands of jobs during the same period, and therefore, would not be losing them with the cap in effect.

"It's still a $1,000 PFD, meaning $650 million will hit the streets in October," he said. "So gear up and get ready."

Many in the audience lived through the disastrous recession of the 1980s, when at least a dozen banks failed and thousands of homes went into foreclosure. Popp emphasized that housing prices, while lower, have not dropped dramatically and it's primarily sellers of pricier homes who are seeing values fall and days on the market exceeding a year or more. In terms of inventory, the Anchorage housing market is starting to look as it did during the Great Recession of the late 2000s, but not the crisis levels of the mid-1980s.

Popp echoed the opinion of realtors who note buyers now have more choices as a period of tightness in Anchorage's housing market appears to have ended.

"Housing is coming off of a four-year sellers' market," Popp said.

In looking at jobs, Popp predicted a reduction of 1,600 in 2016, but emphasized employment in the municipality last year was at a record high. And certain sectors, including health care, tourism and air transport, were doing well. As for unemployment claims, he noted they have fallen every year since 2011 and, so far in 2016, don't seem to be rising above last year's levels.

Some of that fall-off has to do with the elimination in 2013 of special state and federal unemployment programs to assist the jobless during and immediately following the global financial crisis. And not every job that's cut leads to an uptick in the unemployment rolls. Some people retire. Others find new work Outside.

Annual declines in population that began in 2014 are projected to continue. By the end of 2017, AEDC predicts a loss of about 1.7 percent compared to the city's peak population of 301,000 in 2013. With births and deaths holding steady, out-migration is the main driver as people move to the Lower 48 for better job opportunities, retire to warmer climates or find more affordable housing in the Valley. The loss is a modest one when compared to the population loss of 5 percent over two years during the 1980s recession.

Confidence in the future of the state and local economy was at its lowest point in the second quarter of 2016 since AEDC began tracking it in 2010. Still, confidence in personal finances was up from the same quarter last year.

Among those attending the lunch, some are already feeling the strain from an economy that is losing oil and gas jobs.

"Oil and gas are some of our larger customers," said Annette Sheppard, external affairs director in Alaska for Saltchuk, a Seattle-based holding company with transportation businesses in Alaska. "When their projects are stalled, or slowed down, it affects how much work we get."

Saltchuk owns Northern Air Cargo, trucking company Carlile (both based in Anchorage) and several others.

"It does affect everybody, from oil and gas workers, to teachers, to real estate, even if you don't work for the ConocoPhillips of the world," Sheppard said.

Alaska's nonprofit sector is also trying to figure out how to deal with a more difficult economy.

"During the downturn, our work often increases, while funding decreases," said Laurie Wolf, CEO of The Foraker Group, an association representing Alaska's nonprofit industry. "How do you manage that?"

There's no clear answer yet, Wolf said, but she said bringing nonprofits and for-profit companies together in strategic collaboration might be one way to meet community needs.

Chereece Warner, an engineer with ExxonMobil, was more circumspect in her assessment of the economy and future outlook.

"Obviously given the industry I'm in, there are challenges, but given that this is not the first time the price of a barrel has been lower than optimal, we've already taken more steps over the past few years to be efficient." Warner said, referring to the steep price drop in the latter half of 2008.

Warner owns a home in Sand Lake and is "still hopeful." She's not seeing many houses for sale in her neighborhood. "It's either a delayed reaction or nothing is happening," she said.

Looking ahead, Popp criticized lawmakers and their failure to provide fiscal certainty to Alaskans.

"The good old days of oil saving us from ourselves are over," he said. "The so-called No Action Plan, or 'NAP' strategy currently in place is creating significant uncertainty for the business community and consumers alike. NAP leaves everyone wondering about our state's future. Will my taxes go up and by how much? Will our schools and university continue to offer a competitive education? Will our communities be safe? Will key government services my business or family relies on still be there when I need them in the future? Just a few of the questions we are all asking that aren't being answered by NAP."

He argued further erosion of business and consumer confidence and the resulting drop-off in purchasing and investment will contribute to "making the current economic situation much worse than it needs to be."

Find the report at: www.aedcweb.com/

Reporter Annie Zak contributed to this report.

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