Hitting Bottom to Reach the Top: Could 2019 mark Alaska's economic turnaround?

• Author: Simonelli, Isaac Stone
• Position: ECONOMY

Cautious optimism surrounds forecasts for Alaska's economy in 2019 as many predict the state's recession will finally bottom out--making Alaska one of the last energy-dependent states to begin recovery since oil prices tumbled about three years ago.

Economists and business leaders take into consideration a number of factors when assessing economic health including unemployment rates, workforce demands in specific fields, the potential for the Alaska Legislature to approve a strong capital budget, and whether companies are signaling they might be ready to make major investments.

"I think that many are hoping for a recovery in 2019, but a lot of the thinking has been based on the idea that the Alaska Legislature-no longer facing immediate election--will be able to come to an agreement with respect to a long-term solution for funding state government. In addition, the higher oil prices through the end of October have been adding to predictions of a recovery," says Marcus Hartley, president and principal economist for Northern Economics. "The percent drop in oil prices since the beginning of November may dampen some optimism." He continues, "If a capital budget is approved with meaningful amounts of funding, the construction and professional services sectors that have been really feeling the pinch from the lack of state government funding are likely to begin to start hiring more employees."

Mouhcine Guettabi, an associate professor of economics at the Institute of Social and Economic Research, agrees that at least some of the expected economic turnaround is dependent upon legislative choices.

"The capital budget has been bare-bones for four years, which has affected the construction industry and, of course, has meant deferring maintenance and investing in infrastructure," Guettabi says. "A healthy capital budget is certainly good for the future of the state and will be a catalyst in stabilizing the state's economic condition. Construction as of June 2018 is only 86 percent of what it was in June 2014."

Between 2014 and 2017 the construction sector lost 2,178 jobs, roughly 13 percent its workforce. Even with many industry insiders expressing optimism about the economy in the coming years, employment in this sector is expected to grow at a slightly slower pace than the rest of the economy, adding about 700 jobs by 2026, according to the October Alaska Economic Trends released by the Alaska Department of Labor and Workforce Development.

"We have had more than thirty straight months of job losses dating back to October 2015. The rate of job loss has, however, slowed. I anticipate that the recession [job losses] will end in the next six to eight months. A recovery is an entirely different question as we have lost between 12,500 and 13,000 jobs, and I do not anticipate that we will recover them for quite some time,"...