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Business/Economy

Recession grips Alaska as employment losses hit new sectors

  • Author: Alex DeMarban
  • Updated: December 3, 2016
  • Published December 2, 2016

Job losses in Alaska accelerated in the year's first six months as low oil prices kept slamming the economy, with the downturn spreading from the oil and gas and construction sectors to hurt restaurants, bars and stores, according to a detailed view of the jobs picture released by state economists on Friday.

"I about cried when I first saw the data — it was shocking," said Caroline Schultz, an economist with the Alaska Department of Labor and Workforce Development who worked on the report. She described Alaska's current economic state as a "recession."

Employment fell 1.6 percent or 5,530 actual jobs during the period, compared to the same stretch in 2015. The job losses affected most sectors of the economy and rose from a 1.2 percent drop in January to a 2.5 percent decline in June.

The only area showing significant employment growth was health care and social services, up 2.3 percent.

In October, Alaska recorded the nation's highest unemployment rate at 6.8 percent, 1/10th of a point higher than New Mexico and above the national average of 4.9 percent that month.

The cutbacks come after three decades of growth except for a dip in 2009 tied to the national economic downturn.

They follow big cuts in the oil patch during a two-year drop in oil prices. The downturn also hit the construction sector that built many oil-field facilities when times were good. Energy employment reached record highs in early 2015 before falling.

Now, the damage in those sectors has spread to service-sector industries.

"We can safely say that started in the second quarter of 2016," Schultz said.

"We expect those losses have continued through 2016," though the state's data is solid only through the end of June, she said.

Private sector employment fell by 4,867 jobs, or 1.9 percent.

"Oil and gas industry employment was down 2,384 jobs, which was an average monthly loss of 16.4 percent," with the cutbacks growing during the period, the report said.

Construction employment fell 8.3 percent. That industry is also negatively affected by state government spending, which had been fueled by oil taxes.

Public sector jobs fell 0.8 percent, or 663 positions, the agency said. "The decline was driven by a 4.6 percent loss in state government, or 1,199 jobs," the report said.

Local and federal government helped offset some of the public-sector losses, with 183 jobs added primarily in school districts and 353 in federal civilian employment.

Losses of 1,536 jobs were recorded in professional and business services with drops in architectural, engineering and technical consulting. Jobs were lost in the wholesale and retail trade sector in part because of sporting-goods store closures.

A sector tied to the fishing industry — manufacturing — lost work because of weak salmon runs.

The leisure and hospitality industry saw 0.2 percent growth, or 69 new jobs, but employment in restaurants, bars and accommodations fell slightly.

The transportation and warehousing sector also saw increased employment because of air cargo and tourism-related transportation, though freight transportation fell slightly following reductions in local consumption.

The information industry was essentially flat, with the largest chunk of jobs in telecommunications holding steady. But the motion picture industry saw small gains in that sector, growing from 420 jobs to 475 over the year thanks to growth at movie theaters, Schultz said.

The report came on the heels of a report from the University of Alaska Anchorage's Institute of Social and Economic Research that found 60 percent of the boroughs and census areas in Alaska have lost jobs as oil prices have plummeted over the past two years. That report was released in November.

"It's safe to say that by all measures, we are in a recession," Schultz said, with the state recording three straight quarters of job losses, an informal measure of a recession used in Alaska.

Amid the gloomy economic news in Alaska, oil prices have been to slowly rising again with the decision Wednesday by OPEC to scale back output. Alaska West Coast crude oil price of $52.23 a barrel on Thursday was the highest it's been since July 31, 2015, when oil was in the middle of its slide to the high $20-range.

 

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