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Business/Economy

How bad is Alaska’s recession? Economists call it ‘moderate’ so far.

It's been a few months since Kim Hunt, the owner of Partycraft, started working in one of her retail stores again. On a hot day in July, Hunt, a grandmother of five, was hefting a large cardboard box in a Halloween aisle hung with ghosts and skeletons.

Alaska's top economists view the current recession as a moderate one so far. To Hunt, it's worse.

The business has been suffering since October, when what she calls "the perfect storm" hit — the recession, cuts to the Permanent Fund dividend, more customers shopping online, and the uncertainty of an election year.

She cut staff, laid off a good manager and returned to the sales floor. Her husband left the family business for another job. Now, Hunt and her two adult children keep Partycraft running while the grandchildren play in the second-floor offices. Hunt says she often works 12-hour days or more.

Kim Hunt pauses in a scary section of her Partycraft store in Midtown. Online shopping and a local economic downturn have forced her to lay off employees and reduce inventory. (Erik Hill / Alaska Dispatch News)

"I had to let go really good, really loyal people," Hunt said. "That was hard. Really hard. But you've got to cut where you can cut."

Other businesses around the state continue to do the same. Nearly two years into Alaska's recession, the annual average state job count is down about 2 percent from a historic high of 338,262 in 2015, according to state labor data. Preliminary estimates show the job count through May about 1.5 percent lower compared to the first half of last year.

Jobs numbers are the most reliable way to track the recession and economists are keeping eagle eyes on the data. Put 10 economists in a room and you'll hear 11 opinions, so the joke goes, but in assessing Alaska's recession there appears to be some consensus.

State labor economist Neal Fried, University of Alaska Anchorage economics professor Matthew Berman and Jim Calvin, managing principal at economic consulting firm McDowell Group, used adjectives like "moderate" and "middling" to describe the recession.

Economic consultant Jonathan King agreed that job losses are moderate now, but broke ranks by asserting the recession will ultimately be "strong," given the potential for a 4 percent loss in jobs in two years should the 2017 estimates hold.

"The U.S. lost 6 percent of all jobs 2008/2009 and that was the Great Recession. I think when all is said we'll look back at this and say 'It took longer to unfold then expected, but the duration was longer and the losses were significant,'" King wrote in an email.

Bruce Bold, a training coordinator and instructor at the Sheet Metal Workers Union Local 23, said the huge slowdown in construction sidelined five of his apprentices for the first half of the year. Apprentices receive lower pay than more experienced metal fabricators, who make ducting for heating, ventilation and air conditioning systems, and are normally in demand by contractors.

"That's the most apprentices I've seen out of work at once," Bold said.

Bruce Bold is the training coordinator for the Sheet Metal Workers Apprenticeship Training program. (Bob Hallinen / Alaska Dispatch News)

He's adapting to the slack by helping apprentices qualify for a wider array of certifications in welding and sheet metal work. He also started beefing up training for service techs after noticing more businesses wanting to preserve rather than replace HVAC systems.

But he's also accepting fewer apprentices this year because "no apprentice in this program should be out of work."

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Other indicators show obvious, but not dramatic, weakness. Average wages fell last year for the first time since the mid-1990s to 2 percent lower than 2015 levels.

The unemployment rate was up slightly in June from the same month the two previous years. At 6.8 percent, the jobless rate is not remarkably high for Alaska perhaps because jobs were cut through employee transfers, retirements or leaving vacant positions unfilled.

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Housing is weaker, but not collapsing. In the state's largest markets, single-family home prices are flat to slightly down, a reversal after several years of steady growth.

Vacancies in the Anchorage rental market have ticked up, prompting landlords to offer lower rates or other incentives to renters. Home foreclosures remain low.

And the population is essentially flat. More people are leaving the state than arriving, but the birthrate is keeping the number of Alaska residents from skewing sharply negative.

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Some sectors continue to perform well, including health care, air transport and tourism. Linda Brandon, vice president of sales and marketing for Major Marine Tours, said the company did well last year, but "we're seeing an even better year this year."

The company runs maritime glacier and wildlife tours out of Whittier and Seward. With boats selling out more quickly, Major Marine has had to switch to larger vessels for its more popular cruises, particularly on sunny days.

"The call volume is higher than it's ever been," Brandon said. "We usually hire more people than we think we'll need for the season, but it actually worked out that we need everyone we hired."

Given the strong streak in visitor numbers, Major Marine is adding a 150-seat catamaran next year to its Seward fleet of six boats. And the company's Harbor 360 Hotel on the city's waterfront has done so well, it plans to build another hotel in town.

"With the hotel, usually you sell to capacity about four days out, but now we're booked by about two weeks out," Brandon said. "We've been taking phone call after phone call saying, 'Sorry we're sold out. Sorry we're sold out.'"

When will the greater economy recover? Economists Calvin and King believe Alaska will stop shedding jobs by 2018. That's because oil industry layoffs are tapering off and state spending is stable.

"We will find a bottom this year or early next and we can adjust to our new normal," Calvin said. "The economy will hit new point of equilibrium that's more balanced, that is, a little less dependent on oil and gas revenue. The industry will continue to play a critical role, but we'll have to look at other parts of our economy to make growth going forward."

Kim Hunt pauses in the extensive balloon section of her Partycraft store in Midtown. (Erik Hill / Alaska Dispatch News)

Meanwhile, Hunt stays busy provisioning other people's happy events.

Inside the store, everything is done to her specifications. She polishes the clear plastic pouches encasing each Halloween costume with Windex and keeps the dozens of display balloons plump with helium. The paper goods aisle is arranged by the colors of the rainbow.

But she has no control over what's happening in the greater economy and little inkling of what's to come.

In better times, a Friday afternoon like this one meant the store would be filled with people planning all sorts of parties or shopping for odd costumes. Today, with just a few browsing customers, Hunt offered one of her sales clerks an early clock-out time.

"I've done all I can," she said. "I don't know what else I can do."

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