According to a recent report, Alaska’s largest city should expect to see additional job losses through 2018. By the time the current recession is over, Alaska’s economy is expected to shed six percent of all jobs.
Alaska’s gross state product, which has declined for five years, is down 22% as a result of lower oil prices and production. Statewide employment losses, which helped kick off Alaska’s current recession, began in 2015, after oil prices plunged and oil companies cut costs, laying off workers.
The loss of oil revenue has undercut the state’s budget and lawmakers have not come up with a plan yet on how to keep the state in the black over the long run. With so much money removed from the economy, Alaska’s economy has no choice but to shrink with slower business, fewer jobs, and a smaller population.
Bill Popp, the head of the Anchorage Economic Development Corp., told a crowd at the organization’s annual luncheon that the recession will extend through a second and likely third year. The reason it is lasting so long is that lawmakers in Juneau, the state’s capital, have yet to agree on a long-term fiscal plan.
“We should not be in this situation,” Popp said. “The further we prolong this uncertainty with our state budget, the more potential investment dollars we lose that could otherwise flow into our local economy.”
Meanwhile, a leading Alaska economic firm predicts the state’s recession will continue for three more years and doesn’t predict a real recovery. Unlike the Great Recession, which the U.S. economy has recovered from, the Alaska economy is expected to shrink over the long term.
Jonathan King, vice president of Northern Economics, said, “This is our great recession. By the time this is over, we expect to lose 6 percent of our jobs.”
His projections show Alaska job losses bottoming in 2018 to 2020, but not bouncing back until 2026. The population base is expected to decline for at least a decade, with a net loss of 30,000 residents.
To deal with the budget hole, the Alaska Senate is looking at making drastic cuts. However, it’s believed those cuts would worsen Alaska’s recession by an additional 20%.
King says revenue from an income tax cut or the Alaska Permanent Fund dividend would have less of a negative impact because everyone would lose a little, as opposed to broad based job losses.
While Alaska has some new oil finds, much of it is uneconomic–below $60.00 a barrel. Barring an unforeseen event, economists predict oil prices will have a ceiling of $60.00 a barrel for the foreseeable future.
At the same time, congressional Republicans’ plans to repeal Obamacare (the Affordable Care Act) subsidies and Medicaid expansion could be a millstone on the Alaskan economy. The state’s healthcare sector accounts for 15%-20% of the economy and is the state’s biggest employer.
“Expect more job losses this year and next in Anchorage,” Alaska Dispatch News, July 26, 2017.
“Economists say recession will last three more years, followed by a smaller, poorer Alaska,” Alaska Dispatch News, last accessed July 27, 2017.