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Economic forecast in Alaska grim for 2017

January 13th 8:16 pm | Shady Grove Oliver, The Bristol Bay Times-Dutch Harbor Fisherman Print this article   Email this article  

While this year's losses in many industries across the state are not predicted to be as tremendous as they were in 2016, the state's economy is still far from being out of the woods.

"Simply put, Alaska's economic health is in peril and will be catastrophic if the Alaska Legislature fails to pass a sustainable budget," said Department of Labor Commissioner Heidi Drygas in an economic trends report released last week. "In the absence of a fiscal plan, job losses will continue, population loss is inevitable, and the weak job market will have negative ripple effects on real estate."

According to the report, which included numbers from 2016 along with predictions for 2017, Alaska's economy is shrinking faster now than it has at any time since the last major oil boom and bust during the 1980s.

"Local governments may be expected to foot the bill for more of the services they offer as the state withdraws funding, which could lead to further cuts in the near future," the report noted.

The state as a whole lost 6,800 jobs in 2016. Hiring freezes went into place across Alaska along with salary freezes for employees already in place.

"I lived through the 1980s, when job losses in construction nearly forced my family out of state to find work. I don't want to go back to an era when one in five Alaskans lost a home. There is a big difference, of course, between now and the 1980s: This time oil can't save us," Drygas said.

The report, which was divided into statewide, Anchorage, Fairbanks, and Southeast sections, outlined losses in each of those areas. While there were few specifics for rural regions, like the North Slope, Northwest Arctic, Southwest, or the Aleutians, industries that touch those regions were covered.

For example, a downturn in the oil and gas industry last year had ripple effects across the state.

"The oil and gas industry, which includes the major producers as well as drilling firms and oilfield support services lost 2,800 jobs in 2016, a 20 percent drop," said Caroline Schultz, an economist with the Department of Labor who wrote the statewide forecast. "Another tough year is expected, even as prices creep up."

Schultz noted, however, that because the oil industry was one of the first areas to have severe losses following the crash in oil prices — from above $100 a barrel to below $40 a barrel in 2014 — the losses are beginning to even out.

The oil and gas industry is forecast to lose another 1,400 jobs this year, or about 14 percent as opposed to last year's 20 percent.

She noted that while other industries, including some that affect the southern part of the state, also "lost ground" last year, none suffered as severely as oil and gas, which may not come as a surprise to Alaskans, who have seen the state struggle as a result of price crashes over the last two years.

"Manufacturing, which is largely seafood processing, had a slow year with lower-than-expected salmon returns during a year that was already forecasted to be low-volume," Schultz noted. "Those losses will likely be recovered in 2017, which is expected to be a strong salmon year."

Job losses have been significant across the state, with rural areas seeing quite a bit of fluctuation in employment numbers over the last year.

While much of the state saw slight increases in unemployment numbers, much of the southeast and southwest saw unemployment go down.

In the southwest region, unemployment numbers had a huge range, with some of the lowest in the state along with one of the highest.

The Aleutians East Borough saw its unemployment numbers drop from 5.1 percent in the fourth quarter of 2015 to about 4.3 percent by the end of 2016.

The Aleutians West Census Area saw a minimal rise, from 3.9 percent in 2015 to 4.4 percent in 2016.

The Dillingham Census Area also saw unemployment go down throughout the year, from about 10.9 percent to 9.6 percent.

The Bethel Census Area dropped a little bit, from 12.5 percent to 12.1 percent, as did the Lake and Peninsula Borough, from 14.1 percent to 12.5 percent.

The Kusilvak Census Area dropped significantly, from 19.5 percent unemployment to 16.6 percent, which still left it at one of the highest levels in the state.

The Bristol Bay Borough stayed constant at 12.6 percent.

Despite the fluctuations, the job forecast for the state is not expected to get significantly better in the near future, which is why the commissioner called on legislators to come together and pass what she called a sustainable budget.

"My department and others will continue to cut, but we cannot cut our way to a solution — the math simply doesn't work. We could lay off every single state employee and still not balance the budget. Cuts alone are not sufficient and will result in a deeper, more prolonged economic decline than Alaska has ever seen," Commissioner Drygas noted.

The report can be found in full at labor.alaska.gov/trends/jan17.pdf.

Shady Grove Oliver can be reached at sgoarctic@gmail.com.

 

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