Economists say Alaska recession likely to end in 2019

There is a general belief among Alaska economists that the longest recession in the state’s history will come to an end later this year, but the economy isn’t likely to look much different then than it does now.

Longtime Alaska Labor Department Economist Neal Fried expects employers will add roughly 1,400 jobs in 2019, which, while a definite positive, would only be about 0.4 percent growth in the job market.

Overall, the state has lost about 12,000 jobs since late 2015, when depressed oil prices and ballooning state budget deficits led to contraction in some of the state’s largest industries — oil, construction and government.

While the final numbers for 2018 are still being tallied, Fried and University of Alaska Anchorage economic professor emeritus Scott Goldsmith believe final numbers will show the state lost about 2,300 jobs last year, a 0.7 percent contraction of the workforce after consecutive years of losses in excess of 4,600 jobs in 2016 and 2017.

Statewide employment was down 0.3 percent in December, according to a Jan. 18 Labor Department release.

Goldsmith said the state is headed towards what he described as a “post-recession” period and not a true recovery, which would technically mean a return to pre-recession job levels.

Current employment levels mirror 2011, according to Fried.


Relatively stabilized oil prices in the $60 to $70 per barrel range, a suite of new North Slope oil prospects and — tentatively — stabilized state government spending are what Fried and Goldsmith are basing their 2019 projections on.

“The declines are declining,” Goldsmith said at a Jan. 16 luncheon, noting that Alaska was adding jobs at a rate of just about 0.4 percent per year in the three-year period leading up to the recession.

“If you recall those were years when oil prices were over $100 per barrel so one would’ve expected that the economy would’ve been chugging along at a pretty brisk rate, but it really wasn’t so I think that’s worth thinking about as we move forward,” he added.

They’re forecasting the oil and gas industry, which has shed about 5,000 jobs — more than one-third of its total Alaska workforce — since 2015, will add about 300 jobs this year.

Oil and gas companies added 100 jobs in December year-over-year, according to the Labor Department. The closely linked construction industry added another 200 jobs in December and Fried is predicting Alaska builders will hire 900 more employees over the coming year.

“A recession usually ends with a whimper. What generally happens is the positives get big enough to overwhelm the negatives,” he said, which is what he is predicting for 2019.

Additional employment gains of about 500 jobs are expected in the health care and hospitality industries, sectors that mostly continued to grow during the recession. Those additions will offset small losses in government and retail, according to Fried.

UAA Institute of Social and Economic Research professor Mouhcine Guettabi noted that the improved economic outlook is predicated on the Legislature and Gov. Michael J. Dunleavy not resolving the state’s current $1.6 billion budget deficit with spending cuts alone.

“If that ($1.6 billion) were to get removed from the economy, obviously all of this gets tossed aside,” he said.

ISER has concluded that state government spending cuts are the most economically damaging way lawmakers can close the state’s budget gap. That’s because Alaska uniquely relies on oil tax and royalty revenue and as of this year investment earnings from the Permanent Fund to pay for government services — money that is additive to the overall state economy — instead of recycled broad-based tax revenue.

ISER estimates $100 million in state operating budget cuts roughly equates to 1,000 or more full-time jobs lost depending on how the cuts are implemented.

Elwood Brehmer, Alaska Journal of Commerce

Elwood Brehmer is a reporter for the Alaska Journal of Commerce. Email him: