While this will be the fourth year of decline, the level remains considerably above the long-term average, said economists with the Institute of Social and Economic Research at the University of Alaska Anchorage. ISER's Scott Goldsmith and Mary Killorin prepared the annual report for the Construction Industry Progress Fund and Associated General Contractors of Alaska.

Construction workers on scaffolding work on a hotel in Anchorage. New buildings delivered this year will aid the economy in 2009, but work is expected to slow in 2010. File photo/Rob Stapleton/AJOC

Excluding the oil and gas sector, which accounts for 43 percent, or $3 billion of the total, overall construction spending will be $4.1 billion, down 1 percent from 2008, and private sector construction spending will follow the slowdown in the Alaska economy, the report said.

Excluding oil and gas, private spending is expected to be $1.3 billion in 2009, a decline of 24 percent from 2008.

Still the strength of the oil and gas sector will keep the overall private-sector decline to about 12 percent. Mining, utilities and commercial spending will be down, mostly because a number of large projects have been completed, the report said. However, commercial and residential spending will be weaker, in response to the slowdown in the national economy.

Public construction spending will be up 16 percent to $2.7 billion, offsetting much of the decline in private spending. That growth mainly will be due to the large fiscal 2009 state capital budget, but strong federal spending, both on military and civilian projects, and the federal stimulus packages, will also contribute to the increase.

There are, however, several uncertainties in this year's forecast, its authors said. Volatility in commodity prices has affected construction spending in two ways. The lower petroleum and metals prices in early 2009 have made investment in some prospects less attractive, and companies that finance construction activities out of their current cash flow are dealing with shrinking capital budgets.

As the national economy deteriorates, consumers are cutting back on spending and businesses are reducing their capital spending. Credit has become more difficult to obtain, and the unemployment rate continues to rise.

Economists anticipate a long and deep recession at least through 2009 and perhaps beyond, Goldsmith and Killorin said.

The Alaska economy has felt few ill effects from the recession hitting hard at the rest of the nation, but as the recession continues and deepens, Alaska is expected to begin to suffer as well, with resource industries cutting back on development and businesses postponing new investments, according to the report. Consumers also may reduce spending and credit may remain difficult to get, for both the private and public sectors.

While some companies have delayed announcing their capital investment plans for this year, a number have already revised plans announced earlier. The report's projection is based on current anticipated spending, taking into account a modest influx from the federal stimulus package, which will target transportation infrastructure projects that are "shovel-ready."

Despite the degree of uncertainty, there is little downside risk to the 2009 forecast, they said.

Private construction spending will be dominated by a petroleum industry that invests strategically and is not overly influenced by the current recession. Public construction spending will be driven by money from the large state capital budgets of the last several years, and federal spending, driven by military and civilian agency spending, will also provide stability.