The Anchorage economy this year will continue to dig out from the crater caused by the COVID-19 pandemic though full recovery won’t be possible for some time, according to a new annual forecast from the Anchorage Economic Development Corp.
There are multiple positive signs on the city’s horizon this year, including a potential record cruise ship summer for Southcentral Alaska, continued growth at the Ted Stevens Anchorage International Airport, and initial infusions of cash from Congress’ giant Infrastructure Investment and Jobs Act that passed late last year.
“We are very optimistic where things are headed this year,” Bill Popp, the corporation’s president, said in an interview Monday.
The corporation released the forecast and other economic reports Tuesday during a luncheon at the Dena’ina Civic and Convention Center. The forecast centers on job growth and includes a look back at 2021.
It was the first in-person meeting the group has held in more than two years as concerns about the pandemic ease. More than 1,100 people attended, a spokesperson said.
The report raises a number of ongoing economic concerns for the city, including years of dwindling employment and population.
The job losses reached their high with the pandemic, but the city began recovering last year, adding back about 2,500 jobs. Similar job growth is anticipated this year, according to the forecast.
“It’s a good first step to what will be a several-year process to recover from the damage caused by COVID,” Popp said.
The citywide workforce will remain about 7,000 jobs below 2019 levels, though it should grow to about 143,000 positions this year.
Last year’s prediction for growth fell about 1,500 jobs short because of the pandemic, the report says.
“New COVID variants, volatile material prices, and labor shortages disrupted the recovery,” according to the forecast, prepared by the McKinley Research Group, formerly the McDowell Group.
And last year the construction sector, an economic bellwether, performed worse than expected because of those challenges, Popp said.
“It was a hot mess of different random challenges in the supply chain that tangled up the construction sector,” he said.
Residential construction was lower than expected, Popp said.
“There’s basically next to no construction in Anchorage for single-family homes, even multifamily,” he said. “It’s been a challenging time for housing developers to find a path forward. That’s why we have such a tight market, with multiple bids for houses, because not many houses are on the market.”
Still, housing sales were strong last year, he said. They were also strong the year before.
In the construction industry, the report says:
• Residential construction fell last year by 7% compared to 2020, including for remodeling.
• Anchorage building permit valuations totaled $407 million, down 13% from 2020, largely driven by the winding down of projects such as earthquake repairs for Gruening Middle School in Eagle River, the forecast said.
• Commercial permit values rose from 2020 but still trail pre-pandemic levels.
Amid continued uncertainty about the supply chain and rising labor and material costs, the construction industry should add about 200 jobs this year, about the same as last year, the forecast says. The overall job count in construction should reach 7,300, about 400 jobs below 2019 levels.
In other key areas:
• The high-paying professional and business services sector, featuring engineering, accounting, legal and other jobs, should add 400 positions. That should significantly outpace last year’s job growth, but the overall count will remain below 2019 levels. Federal infrastructure spending, and state capital budgets that grew from pre-pandemic levels thanks to more federal spending, will play key roles.
• Jobs in the oil and gas industry should remain flat, at about 1,700 jobs. The overall count is about 2,000 jobs fewer than the peak in 2015, when a period of lower oil prices began to hurt the Alaska industry. ConocoPhillips and Prudhoe Bay operator Hilcorp Alaska are pursuing new projects. But ConocoPhillips’ big Willow prospect has been delayed by legal challenges and additional federal review. Also, some exploration companies have reported challenges raising capital after banks announced they won’t finance new Arctic projects, the forecast says.
• Health care should add back 200 jobs, similar to last year’s growth, though that’s highly dependent on COVID-19 impacts continuing to ease, the report says. The industry faces pandemic-related labor challenges related to burnout and illness, the report says.
• The transportation, warehouse and utilities sector will add about 250 jobs, far fewer than the growth seen last year but still relatively strong. Continued strength in cargo and more seats and flights for passengers at Ted Stevens Anchorage International Airport should drive growth. Initial construction for some of the proposed cargo projects at the airport, worth $1 billion, is set to begin this year.
The hardest-hit sector during the pandemic, leisure and hospitality, is expected to lead job growth in Anchorage, adding 800 jobs.
Hotels, restaurants and shops in that sector should benefit from a second strong summer of independent travel, referring to tourists who don’t reach Alaska by cruise ship.
This year should also see the return of cruise ships to Southcentral Alaska, and in potentially record numbers, the forecast says.
Cruise ships that reach Seward or Whittier, and bring tourism to Anchorage, are expected to have record capacity of 476,000, though any additional measures related to COVID-19 could affect those numbers, the forecast says.
Over the years to come, long-term forces will continue to be a problem that the city needs to address, including continued population loss and a shrinking labor pool, the forecast says.
“Net outmigration is the big cause of that,” Popp said. “We have work to do get people to stay here in addition to getting people to move back and we have work to get people trained to the point where employers have the skills they need in Alaska.”