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Construction Job Outlook: Cloudy

by Brad JoyalMar 8, 2019Construction, Magazine

The silver lining—hundreds of millions of dollars in projects coming

In October 2018, former Alaska Department of Labor and Workforce Development Commissioner Heidi Drygas said: “We’re about to ramp up on some pretty significant projects in Alaska. We have all this work going on, on the North Slope; we have a boom in military construction in the Interior and other Interior build out projects. We have an expansion of mining at Fort Knox and Kensington; Donlin Gold looks like it’s going to come online, and they’re all happening at the same time.”

That statement ignited talk about the construction industry and what the state could expect in the near future.

While the North Slope and the Interior are carrying the brunt of Alaska’s construction projects, other areas of the state, including Anchorage, are missing the major projects that would attract workers— both from the state and Outside—in droves. Overall, the state’s construction landscape continues to inch toward brighter pastures.

Fairbanks F-35s

Department of Labor and Workforce Development Economist Karinne Wiebold says the department recently completed its forecast for 2019 and believes there will be an estimated 900 new construction jobs available throughout the state this year. According to Wiebold, the majority of those jobs are connected to the F-35 bed down at Eielson Air Force Base. Although the F-35 project started slowly in 2018, it will ramp up this spring and summertime. In September 2018, the Final Fairbanks North Star Borough Eielson Air Force Base Regional Growth Plan was released, stating the project will bring more than $500 million of construction to the North Star Borough.

But the construction of several projects related to housing the F-35s isn’t limited to the base. Integrating the F35s is expected to create more than 4,000 new jobs by 2022, and some are estimating that 800 new housing units will be required in the Eielson, Fairbanks, and North Pole area. Infrastructure doesn’t build itself, and these projects spell out a necessary influx of construction workers in the Interior.

“There’s a very significant housing need in the Fairbanks area off-base,” says Bill Popp, president and CEO of the Anchorage Economic Development Corporation. “They’re talking as many as 800 units of housing that will need to be constructed, multi-families and single families in the North Pole and Fairbanks communities. That’s going to take a lot of workforce. That’s a lot of housing to be built in that area. It’s going to be a nice shot in the arm for the construction trades not only in Fairbanks but statewide, because there’s going to be a lot of contractors that are going to have to come in help with that.”

Among the companies already involved in preparing for the F-35s is Watterson Construction, which currently has multiple projects at the air force base.

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“Right now, there’s an incredible amount of work at Eielson for the F-35. We actually have five open contracts on Eielson; two of them are almost done. They’ll be cleaned up in the spring,” says Bill Watterson, company president, who estimates his Anchorage-based company will employ between 120 and 140 people this summer. “As far as the workforce is concerned, right now we have about 40 people working on one weather shelter at Eielson. We have a second weather shelter which we will start up again about the first of March. That will end up—with all the subs and everything—we’ll probably have 75 people working on it at a time. Then we have another one that we’re going to start up in the spring that we’ll have, including subs, 30 people at a time.”

Watterson says he rarely hires construction workers from Outside, adding that the bulk of any additional hires will likely be made at Fort Greely.

According to Popp, the F-35 project will continue to gain traction throughout this year.

“We do know that Army Corps of Engineers is going to be spending about $640 million in Alaska in 2019,” he says. “That’s about a $90 million increase over 2018. That mostly revolves around the Interior and mostly revolves around the F-35.”

“Right now, there’s an incredible amount of work at Eielson for the F-35. We actually have five open contracts on Eielson.”

—Bill Watterson, President, Watterson Construction

Sourcing the Workforce

Wiebold is not concerned that there will be a shortage of qualified people to fill the estimated 1,000 positions coming open this year.

“From an economist perspective, those jobs will be filled,” she says. “They’ll either attract laborers from Alaska who are not doing anything or are doing something else and could get paid more doing construction. Some people might come up to Alaska to work these jobs, and they’ll either go home afterwards or they’ll stay. Construction has always had nonresident workers in Alaska. Over the past twenty years or so, it’s been about 20 percent of our construction workers are nonresident workers. Those jobs will be filled.”

Anchorage-based economist Neil Fried agrees with Wiebold’s assessment, adding that the industry is slowly growing, not leaping forward at such a rapid rate that it should warrant concern. “It’s a better market because it is starting to recover some,” Fried says. “But it’s certainly not booming. Overall construction activity, from a historical standpoint, is still pretty low.”

While a construction worker shortage is not currently looming, it’s important to note that some construction workers that may have been laid off or out of work in recent years have likely moved on to other opportunities or moved out of the state. As the construction industry recovers and moves forward, Outside economies and forces will have an impact on the availability of labor.

“The challenge is that down in Seattle, that area is a super hot market for construction right now,” Popp says. “Things are just happening down there in that whole general area. They’ve got a continuing boom in that region. That’s our next door neighbor when it comes to the United States, and we’ve probably lost a fair number of people to that market in the construction trade. I think it’s reasonable to assume we’ve lost a number of workers or potential workers.”

Earthquake Recovery

One unexpected area of construction that will be ongoing throughout 2019 is earthquake recovery. Immediately after the 7.0 magnitude quake struck Anchorage on November 30, the Department of Transportation began to reach out to companies to help restore the region after significant damage impacted roads and infrastructure. Among the companies eager to help out was Anchorage-based Mass Excavation.

“It was exciting. Guys jumped on it,” Mass Excavation General Manager Mark Erickson says of having an opportunity to get the state back on its feet. “They’re typically laid off by this time of year and not working, so they got an extra opportunity to put a paycheck in their pockets. It was a different mentality—it was just ‘Go!’ There’s no regulatory baloney that you’re waiting for permits and waiting for this and that, it was just like, ‘We have to get this done.’ It was a whole different premise.”

Erickson says that Mass Excavation had conducted limited work with the Alaska Department of Transportation & Public Facilities in the past, but the opportunity to help with earthquake recovery was rewarding for him and his employees. “It was a good opportunity for us to demonstrate our capabilities to react and handle this type of situation, so it was kind of fun in that regard.”

Popp says, “There’s just not a lot of big [construction] projects,” in Anchorage, but he is optimistic that earthquake recovery activities will continue to create jobs around the region.

“Earthquake repair work is going on and probably will be going on for several months,” he says. “If there is a silver lining to the earthquake, it’s the fact that it happened when it did, which is a benefit in the fact this is a low season for construction. There are a lot of folks that are sitting on their normal winter sideline that got called back into work, so we’re going to see a nice boost in that category. The trick will be how much work will be created by earthquake major renovations, major rebuilds, demolition, and new construction that may result once final decisions are made on buildings in Anchorage, Eagle River, and the rest of the region that were significantly damaged and ultimately might have to be demolished or replaced.”

Overall Outlook

Even with projects already underway at Eielson and more expected to ramp up on the North Slope throughout 2019, industry experts still say there is some cause for concern about how many projects will take off and how many workers they’ll require. Part of the uncertainty surrounding the landscape is the fact that there’s still a lingering effect from when the oil price took a drastic dip in late 2015. The fall in oil prices slowed oilfield-related construction in many instances and resulted in reduced revenue being collected in state coffers, which significantly impacted funding available for state projects.

However, as oil companies pursue recent finds and opportunities on the North Slope, Popp says the entire state will see the benefits. “The big projects that are being proposed on the North Slope are good news,” he says. “We want those big projects, and they’re going to have a multiplier effect on our state because not only will there be the direct result of employment for those projects but then you’ll have the benefit of the new production that they’re going to bring online, and that will help our state have a capital budget again.

“That’s probably one of the biggest problems we’ve had in addition to the slow economy—it has not helped that our state government has completely shut down on putting out a capital budget other than federal pass-through dollars. That’s created a fairly significant vacuum in the construction industry for new projects coming online. We’ve been pretty much relying on federal dollars and private sector dollars for capital projects, and the state is kind of just not a player in that field right now. It’s not reinvesting in itself. It’s not doing the needed maintenance projects, the upgrade projects, let alone new projects. That’s a problem, and it’s creating a void in our state construction picture.

“It has not helped that our state government has completely shut down on putting out a capital budget other than federal pass-through dollars. That’s created a fairly significant vacuum in the construction industry for new projects coming online.”

—Bill Popp, President/CEO, AEDC

In Anchorage, there is a major project on the horizon: Popp points to the reconstruction of the Port of Alaska as something that will take years to complete and estimates significant plans will begin being finalized in the coming years.

“That’s going to be critical,” he says. “There was a collective holding of breath right after the earthquake as we waited to find out if the port had been irreplaceably damaged or if it had reached a point where it was going to be out of action for a while, because that would’ve been devastating to the state’s economy. Its reconstruction has to happen.”

The overall outlook for Alaska’s construction is different throughout the state, but the good news is the industry continues to take steps in the right direction.