Alaskanomics Blog: Anchorage Economic Development Corporation 3-Year Outlook
The Anchorage Economic Development Corporation (AEDC) hosted its annual 3-Year-Outlook Luncheon on Wednesday. In recent months, many have expressed concern about the future of the economy in Anchorage. There has been worry that it is a repeat of the crash of the 1980’s and many are wondering if it is time to abandon ship and leave Anchorage. AEDC President and CEO Bill Popp assured the audience that while we are seeing a drop in the economy, we are in a much better place than the mid-80’s and it is not time to panic.
He started his presentation with notes about the past year and first half of 2016. There has been a marked shift in the housing market in Anchorage. For the past four years it has been a seller’s market, but we are now firmly in a buyer’s market with average sale price dropping slightly from 2015. Alaska continues to be ranked in the top five states for our low number of foreclosures behind only Washington DC, North Dakota and West Virginia. Bankruptcy filings are low and Alaska banks and credit unions have a good amount of cash on deposit. All of these signs show that we are not in the same situation that we were 30 years ago.
Popp continued with the 2016 jobs update. A quick recap of 2015; Anchorage had record high employment, saw an increase of 1,000 jobs and the average unemployment rate was 5.0 percent. In the first six months of 2016, Anchorage lost 900 jobs, which is a 0.6 percent decline. The year-to-date unemployment is 5.5 percent. June was a difficult month for the oil and gas industry, specifically the loss of 400 jobs at Shell. Construction and professional/business services also saw a large decrease in June. There were winners in the job market in the first half of 2016. Health care, retail, government, transportation, and leisure and hospitality all saw gains through June of 2016.
As a measure of the economy, initial unemployment claims and continuing unemployment claims did not have a sharp increase in 2016 as compared to the 2nd quarter of previous years. Another way to measure the economy is through real GDP. Alaska ranks 45th in the nation for real GDP with $54 billion and is 0.3 percent of the national economy. This may seem low, but Alaska’s per capita rank is much higher. A potential concern is that Alaska is one of only two states to have a decrease in real GDP from 2014 to 2015. Alaska’s real GDP decreased 0.5 percent last year and is 50th in front of only North Dakota, who had a loss of 2.1 percent. While the measures are starting to show a slowing of the Alaska and Anchorage economy, it is not a catastrophe and there are still bright spots in the economy.
Popp’s presentation shifted to the Anchorage Consumer Index Report. This year was the first time that the overall index dropped below 50 percent, showing that Anchorage business leaders are not optimistic about the future of Anchorage’s economy. The index is at 48.2 and could easily shift above 50 if things begin to improve. The index measures three things: Local Economy Confidence, Personal Financial Confidence, and Future Expectations. Confidence in the local economy (50.8) and personal finance (65.7) is still over 50, but future expectations (38.2) is at the lowest mark that AEDC has seen in the history of the survey. This is problematic because while people are confident in their own finances and the local economy, if confidence in the future continues to be low, it will change spending habits and will cause problems for the economy.
The local presentation wrapped up with AEDC’s 3-Year Outlook. We will see a slight decrease in population in Anchorage this year, followed by a few steady years before moving to a slight increase in 2019. The same is predicted for the number of jobs in Anchorage through 2019. This is after four years of near record employment in Anchorage. Personal income is predicted to drop slightly in 2016, which is a reflection of the $1,000 Permanent Fund Dividend. This year’s dividend will be approximately the same amount as it was in 2013.
Air passenger volume through the airport has been on the rise since 2013 and is expected to continue because of global unrest. Alaska is still a safe place to visit, but is also exotic to travelers from the Lower 48 and worldwide. Anchorage air freight volume spiked in 2015 and made Anchorage the 4th busiest air cargo airport in the world, behind Memphis, Hong Kong and Shanghai. 2016 and beyond is expected to drop slightly from 2015 but maintain strong volume through 2019. The same is predicted for volume through the Port of Anchorage, which sees 80 percent of goods that come into Alaska.
Popp summarized his presentation with the following bullet points.
- 27 years of steady economic growth has come to an end in 2015
- The pinch is ongoing and likely to continue through 2017
- Anchorage’s return to growth is possible by 2019
- While painful, the pinch is not a punch!
- Even in a downturn there will be opportunities
- Now is not the time for a NAP (No-Action Plan). We need to fix State finances now!
There is a mix of good news and bad news when looking at 2016 and into the future, but Anchorage is not facing the catastrophe that it was 30 years ago. We can all work together to ensure a strong future for Anchorage and Alaska.