AEDC Is Optimistic about Growth in the Anchorage Economy in 2021

During the Forecast, Popp presented a few key findings from the Business Confidence Index. The overall composite is 48.5, which is a 7 point decrease from last year’s Index, though last year’s was conducted pre-pandemic. According to Popp, the range is 0 to 100, from very pessimistic to very optimistic, and a score of 48.5 is an indication of uncertainty, not necessarily optimism or pessimism among the business community in general.

That said, when asked about how the Anchorage economy will fare in 2021, 52 percent of businesses surveyed were pessimistic, expecting the economy to get worse, while only 40 percent expected the economy to fare better.

This isn’t surprising: 2019 was the fifth year of an ongoing recession, and that year Anchorage saw an overall loss of 200 jobs and average unemployment of 5.1 percent. Economists and the business community anticipated 2020 would be a turning point. Instead in 2020 Anchorage lost 12,400 jobs and saw an average unemployment throughout the year of 10 percent.

According to Popp, “All sectors of the Anchorage economy lost jobs in 2020 with the exception of the federal government, which gained 200 jobs,” mostly due to hiring for the 2020 census. Even healthcare, which many might have expected to gain jobs because of the pandemic, lost 800 positions in 2020, due in large part to the reduction of elective procedures and services.

In addition to the community’s optimism or pessimism about the future, the Business Confidence Index also asks businesses to identify barriers for growth and potential solutions. “The state’s fiscal crisis remains the most important issue on the minds of businesses,” Popp said.

The most significant barriers to business growth in 2021, as indicated by survey participants, are:

• the condition of the state economy (according to 93 percent of participants),
• the spread of COVID-19 (86 percent),
• condition of the national economy (75 percent),
• the cost of health insurance (62 percent),
• and the availability of professional/technical workforce (58 percent).

Popp said that labor related challenges are in some ways positive, as businesses are looking for employees—they have positions to fill. “Businesses have unmet needs for workers in a number of industries; the challenges will be addressing that skill shortage,” he said.

For 2021, the top five “Important Issues Affecting Anchorage’s Economy” as identified by the business community are:

• Sustainability of State of Alaska operating budget (according to 79 percent of respondents)
• Ending the spread of COVID-19 (79 percent)
• North Slope oil production (71 percent)
• Attracting new businesses to Anchorage (68 percent)
• Retaining and expanding existing Anchorage businesses (68 percent)

Of the solutions presented to address Anchorage’s economy, most participants support reducing the PFD (74 percent) and reducing state spending (73 percent). The majority of respondents also supported a statewide sales tax (70 percent). Approximately half of businesses surveyed supported other broad-based statewide taxes or a statewide income tax.

Optimism for 2021

Popp did highlight one bright spot in Anchorage: the housing market. Last year, despite a low inventory, 3,244 single family homes were sold in Anchorage, as compared to 2,719 in 2019. The spike in demand coupled with low inventory impacted home prices, and the average price for a single family home in Anchorage rose to approximately $385,000.

This isn’t likely to change in 2021, he said, citing a recent surge in home building permit applications. “Overall 2021 should be another good year for housing-related businesses.”

While the housing market was a lonely bright spot in 2020, AEDC anticipates there may be others in 2021, with this caveat: “COVID-19, as well as the uncertainties for global, national, and state economies, were all wildcards for this year’s forecast,” Popp said. “[But] in this context, we have good news to share with you today, with just a note of caution.”

For the oil and gas industry, after losing 400 jobs in 2020 due to a mix of COVID-19, collapsing markets, and the departure of BP from the state, AEDC anticipates 100 additional jobs by the end of the year. “There will be growth, but it will be slow to develop until later in 2021,” Popp said.

The healthcare, retail, and transportation industries are anticipated to gain 400 jobs by the end of the year, while leisure and hospitality is expected to gain 1,700 jobs, the largest increase for any industry in Anchorage. The professional and business services sector is projected to gain 300 jobs, and there’s an anticipated increase of 100 government jobs, while construction is anticipated to remain flat.

Overall, the 2021 AEDC Economic Forecast, as prepared by McKinley Research, projects 4,000 additional jobs in 2021, the largest increase in employment since 2001. According to Popp, no industries are expected to lose any more jobs, but most of this growth will likely take place in the latter half of the year. “To be sure, this will be a long journey to full recovery,” he said. “We have both the five-year recession and pandemic to recover from… But in the face of all that was awful, we have every reason to be optimistic.”

One cautionary note Popp emphasized is Anchorage’s shrinking population. While in years past the birth rate made up for out migration, that’s no longer the case.

Anchorage’s highest population count was in 2013, when 301,000 Alaskans resided in the municipality. The city has since lost 12,000 people, and in 2020 alone saw a loss of 3,500. The trend of migration from Anchorage to the Lower 48 is increasing, not decreasing. “Population decline should be a front and center issue for our city to address in coming years,” Popp said.

It’s also critical for the state to get a handle on its finances. Oil prices are not rising to $100 per barrel or more again in the near future, or perhaps ever, and Alaska cannot continue to flounder in uncertainty about how to proceed without our favorite revenue source.

“We as Alaskans should expect the state of Alaska to solve the fiscal policy crisis this year,” Popp said. “We should expect our local government, business, and community leaders to have a long term plan for the future of our city. We can no longer accept short term planning built around the next election cycle.”

In order to effect positive changes, AEDC has joined with Visit Anchorage, the Anchorage Downtown Partnership, and the Anchorage Chamber of Commerce to form the Alliance to Activate Anchorage, which is comprised of two board representatives from each organization. It’s a nonbinding, consensus-driven effort to support the stability and growth of the community.

According to Visit Anchorage, “The combined memberships of these four organizations represent a significant portion of Anchorage businesses, workforce and industry activities across all economic sectors. This new connection allows Visit Anchorage and the other partners to plan and coordinate common action, better leverage resources, support local businesses and actively pursue economic opportunities.” 

AEDC has also joined the Conquer COVID Coalition, which has the goal of educating Alaskans “about how they can keep COVID from spreading and why they should get vaccinated so we can rebuild a healthy economy.”

According to Popp, “Anchorage has a bright future—we truly do. We just have to expect more of ourselves and each other and just do it. We are Anchorage, and there’s nothing we cannot accomplish together.”

The full 2021 AEDC Economic Forecast and 2021 Annual Business Confidence Index Report are available here.