Business/Economy

Alaska’s economic indicators tell messy story amid slow pandemic recovery

COVID-19 made a mess of Alaska’s economy, and more than a year into the recovery, some of the fundamental metrics still don’t add up.

“Where are the workers?” Dan Robinson asked during an Oct. 27 online presentation hosted by the Alaska Department of Labor and Workforce Development.

Robinson is the chief economist in the department’s research and analysis section. He, among others, said the pandemic’s effect on Alaska has upended some of the principal notions of how an economy typically functions.

“Normally when you’re in a recession you have way more people than jobs,” Robinson said. “We have the opposite.”

Alaska had the highest rate of open jobs in the country at 9% of available positions unfilled in August, according to a federal Bureau of Labor Statistics survey, down from 10.6% in July, also a national high. At the same time, participation in Alaska’s labor force by working-age individuals — while up slightly over 2020 — has averaged 64.4% so far this year, down from 2019 and every other year over the last decade, according to Labor Department data.

The state’s unemployment rate, currently at 6.3%, has been slowly falling over the past year since peaking at nearly 12% in the spring of 2020, but is still above the 5.1% rate just before the pandemic hit.

Alaska’s unemployment rate has mostly returned to historical norms. But the state’s recovery has lagged behind the nation’s in the most basic category: jobs.

Labor Research Economist Karinne Wiebold said Alaska this year has regained 30%-40% of the nearly 50,000 jobs lost at the peak of the pandemic’s impacts. That makes Alaska’s recovery among the worst in the country, according to Wiebold.

“The interesting story to me is how far we have to go,” she said.

Alaska has averaged approximately 310,000 jobs so far this year in its highly seasonal economy, which is growth of about 2.5% over last year, but is also still 6%, or about 20,000 jobs, short of 2019.

Longtime Department of Labor Economist Neal Fried said Alaska was just starting a long-term recovery out of a years-long pre-pandemic recession when the economic shock of COVID-19 hit, while most of the country was in a sustained period of growth.

“This is the first recession out of many, many recessions where Alaska joined the rest of the country,” Fried said of the pandemic’s hit to the state.

Reduced employment in the oil and gas sector, Alaska’s trademark industry for decades, exemplifies the lagging recovery and is possibly an indicator of things to come. Oil and gas employment in Alaska has largely held steady at about 6,700 jobs this year, down more than 30% from pre-pandemic levels and nominally above pandemic lows reached last fall,just before the larger North Slope operators resumed drilling. That is despite oil prices that have strengthened throughout the year to the recent plateau of about $85 per barrel.

“This is not just Alaska, the industry is obviously responding differently to this $80 oil than it did 10 years ago,” University of Alaska Anchorage Institute for Social and Economic Research Director Ralph Townsend said.

Fried suggested the economic disruption might have spurred an ongoing “rightsizing” of Alaska’s economy to better match the corresponding demands of the state’s shrinking population.

He emphasized that while there may be disconnect in some of the traditional economic indicators, having a job market tipped toward workers has been a positive for many people.

“What it is also doing is for those who want to work or are working, their wages are going up faster than normal, and they have choices — more choices than they’ve had in a long time,” Fried said.

“It’s just a weird economy. I’ve been doing this for a very long time and it’s not the first time we’ve had a labor shortage by any means, but this is definitely the most significant I’ve seen,” he said.

Each of the economists also insisted that it is the pandemic itself and widespread fear of COVID-19 that has and continues to impact the economy, not corresponding business restrictions or public health mandates.

“Until we get by the pandemic, there are workers who will stay on the sidelines, and until we get by the pandemic, customers will continue to change their habits,” Townsend said. “There’s good reason to leave some workplaces if you’re 55 to 60, particularly with health concerns.”

However, he and Alaska Economic Development Corp. CEO Bill Popp noted separately that the ongoing trend of increasing outmigration from Alaska, which has added to the state’s labor issues, started years ago.

“The pandemic may have served as a tipping point for broader forces,” Townsend added.

The state has been losing 7,000 or more individuals per year than have moved to Alaska annually since 2016, according to Labor Department data.

Popp believes the cost and availability of child care has been a sneaky factor keeping some parents out of the workforce but “there is no ‘the’ issue,” he said in an interview.

The primary issue the pandemic laid bare for him is the need for Anchorage, as the state’s economic hub, to invest in making itself a place skilled, working-age people want to live.

“What are we going to do to engage workers to move here and get locally produced workers to stay here?” Popp said. “The rate of outmigration is accelerating and that just makes a bad situation worse.”

He dismissed suggestions that the surge in remote work will be a sustainable boon for Alaska.

“We have a very strong outdoor proposition but it is more than one factor that plays into where people choose to live. We are going to have to start thinking about what it is we need to do in regards to economic opportunities, quality of life issues, providing a quality education,” he said. “Our goal is to attract workers who want to stay here and put down roots here.”

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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