AEDC: business confidence fall tied to legislative inaction

  • Anchorage is expected to lose more than 2,000 jobs in 2017, according to the latest forecast from the Anchorage Economic Development Corp. (Photo/Kris Valencia/The Milepost)

Anchorage is in for another tough year economically as businesses continue adjusting to the sudden and wholesale change in the city’s dominant oil industry that happened in 2014.

The Anchorage Economic Development Corp. is projecting its city will lose 2,200 jobs in 2017 on top of the estimated 2,700 jobs Anchorage employers shed last year. The 2017 projection equates to 1.4 percent of the city’s job market; the 2016 job losses were a 1.7 percent market contraction.

State economists are predicting Anchorage will lose about 2,800 jobs in 2017, part of 7,500 fewer jobs predicted by the end of the year statewide.

Where the majority of the 2016 downturn was in the closely tied sectors of oil and gas, construction and professional and business services — engineers, architects, environmental consultants and the like — AEDC expects the current year losses will be spread more evenly across more sectors.

“The major bloodletting is over with but there are still some echoes” of last year, AEDC President Bill Popp said of the professional services sector during a Feb. 1 economic forecast presentation.

The aforementioned industries collectively shed about 3,700 jobs last year, which was primarily offset by continued gains in health care. In 2017 those industries are expected to shrink by about 1,000 positions — 400 each in construction and professional services and 200 in oil and gas.

Similarly, every other sector studied of the Anchorage economy is projected to lose between 200 and 400 jobs over the next 11 months with the exception of health care, which is forecasted to gain another 400 jobs.

Popp, Anchorage Mayor Ethan Berkowitz and Lt. Gov. Byron Mallott, who all spoke to the large business crowd gathered for AEDC’s Feb. 1 luncheon, all laid a significant portion of the blame for the city’s and Alaska’s economic troubles at the feet of the Legislature.

Their message was once again that uncertainty over how or if the state will resolve its roughly $3 billion budget deficit, which is on its third year and counting, has left businesses hesitant to invest.

Gov. Bill Walker was roundly criticized by political groups of all leanings for parts of or the entirety of the fiscal plan he proposed before the 2016 legislative session. However, legislators have been at least equally berated for failing to adopt the governor’s plan or propose and pass their own.

Popp said the private sector’s worries about the impact of the public sector problem have shown up in business surveys AEDC has conducted and are no longer strictly anecdotal.

“This is not just a fiscal crisis; this is a crisis of confidence,” he said of the state’s budget situation.

The economic contraction anticipated for this year could translate into an overall population decline of about 1,500 residents “as job losses result in additional out-migration,” AEDC’s 2017 Anchorage Economic Forecast report states.

The city’s population peaked at 300,900 in 2013 and has gradually fallen since. It is expected to average 297,500 people this year.

Popp attributed Anchorage’s population shrinkage to a number of factors, including the unemployed seeking work in the stronger Lower 48 economy as well as some of the city’s residents choosing to move to the nearby Mat-Su region where housing is cheaper and commute to Anchorage.

He said some of the same reasoning could be applied to the city’s unemployment rate, which has remained in the 5 percent range despite the job losses. The unemployment rate in Anchorage was 5.1 percent in December, according to the state Labor Department; it averaged 5 percent in 2015.

Additionally, Popp and other economists have also noted that a substantial portion of lost jobs to this point were the result of attrition or retirements without rehiring.

Health care has been a burgeoning sector of the Anchorage economy for more than a decade as the state’s population ages.

The health care industry added more than 900 jobs in Anchorage last year, according to AEDC. Industry experts have attributed much of that growth to the $20 million per month being pumped into the sector since Walker signed the state up for expanded Medicaid services in September 2015.

Popp said despite the positives health care is providing the Anchorage economy when it really needs it, he is concerned that “we have the makings of a bubble” in the industry, particularly if federal actions to repeal the Affordable Care Act also mean the loss of government health care dollars.

Finally, the substantial losses that the higher paying industries took the last couple years are starting to show up less money flowing to Anchorage’s secondary industries, according to Popp.

While Anchorage’s and broader Alaska’s tourism industries are projecting another very strong visitor year in 2017, a lack of in-state spending has AEDC predicting the city’s leisure and hospitality industry will lose 300 jobs over the year.

Similarly, retailers are expected to contract by about 400 jobs in response to less money in the Anchorage economy currently and uncertainty about the future.

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

Updated: 
02/07/2017 - 8:17am

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