Alaska’s economy faces significant headwinds in 2016, largely due to sustained low oil prices. The state is forecast to lose about 2,500 jobs in 2016, a 0.7 percent decline, after gaining 1,700 jobs in 2015. (See Exhibit 1.)
This would be the first year of job losses since 2009, when Alaska felt the wake from the national recession. The state’s job growth rebounded quickly in 2010 and remained relatively strong through 2012, buoyed by the federal stimulus package, large capital budgets, and high oil prices. Growth slowed to a crawl in 2013, and employers added jobs at a yearly rate of half a percentage point or less between 2013 and 2015.
Consequently, job losses will be concentrated in the oil and gas industry and state government as well as the construction industry, which will be hit by reduced investment from oil companies and capital budgets
State Government Loss Accelerates
State government led all industries for losses in 2015, shedding 700 jobs. (See Exhibit 4.) State employment, which includes the University of Alaska, had grown slowly for the past decade. Between 2004 and 2014, state government added 2,400 jobs for about a 1 percent growth rate per year. Historically, state government employment has been a source of economic stability. Losses accelerated in the second half of 2015, spurred by fiscal year 2016 operating budget cuts. Retirements and attrition have also contributed to the decline.
State government employment is forecast to lose another 1,000 jobs in 2016, carrying over last year’s trend. Until the FY 2017 operating budget is passed by the Legislature and signed by the governor later this year, we won’t know how severe losses will be in the second half of 2016. Losses through attrition and retirement are also expected to continue throughout the year.
A Record Year for Tourism
The visitor slice of this industry should fare well again in 2016, as the ingredients for another strong visitor season are in place. Bed taxes collected for the first two quarters of 2015 were up 6 percent and air travel numbers into Anchorage this past season were up 10 percent. The national economy also continues to grow and energy prices remain low, which will likely generate more convention and visitor traffic. The industry projects a strong season, and early bookings reflect that optimism. The Alaska Travel Industry Association predicts tourism will grow by 2 to 3 percent in 2016, and the cruise ship industry projects its passenger count will top the 1 million mark for the first time.
Government Losses Hardest on Southeast
In 2016, losses will primarily come from state and local government. State government will continue its decline, and local government will reverse its 2015 gains. Federal job levels, however, will likely remain stable.
For private industries, there’s little potential for growth outside of tourism. Falling government employment will eventually dent demand for goods and services and drive down private employment, but this probably won’t be significant in 2016.
The Alaska Department of Fish and Game forecasts the 2016 Southeast pink salmon run at 34 million, below its 10-year average and the same as the 2015 harvest. Pinks make up over half the salmon poundage caught in Southeast each year, and prices remain low, largely due to a surplus of canned pinks dating back to 2013.
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