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AEDC Anticipates 2020 Will Bring the End of Anchorage’s Recession

by | Jan 30, 2020 | Monitor

A slide from AEDC’s 2020 Economic forecast Luncheon shows the organization’s net jobs forecast for this year.

Arie Henry | Alaska Business

At the Anchorage Economic Development Corporation’s (AEDC) 2020 Economic Forecast Luncheon, AEDC President and CEO Bill Popp shared with the Anchorage business community the organization’s projections for 2020, as well as some early 2019 data and the results from its latest Annual Business Confidence Index Report

Popp said AEDC anticipates that by 2021 Anchorage will see positive job growth, and while that growth may be as little as 100 new net jobs in the city, it would still mark the end of the recession felt in Anchorage for half a decade. He was careful to note that this depends on a variety of factors, and the unpredictability of such projections are underscored by the fact that it was highly anticipated that 2019 would see job growth in Anchorage. Instead, early numbers indicate a net loss of approximately 300 jobs (0.2 percent) in 2019, and that number could be higher, in the 400 to 600 range once numbers are finalized.

That said, 2019 saw positive job growth in many sectors: construction and professional business services each saw a gain of 400 jobs; hospitality gained 200; and oil and gas and manufacturing each saw 100 additional jobs.

However, losses in retail (400 jobs lost); state and local government (combined 400); information (200); and healthcare, transportation/warehousing/utilities, and finance (100 each, 300 total) meant that overall the picture was one of another year of recession. 

AEDC is projecting that in 2020, healthcare, transportation, professional services, construction, and hospitality will all show job growth (a total of 900) while government, retail, and finance will continue to see losses. AEDC also projects oil and gas will see job losses next year, though during his presentation, Senior Vice President of Hilcorp Alaska David Wilkins said the company anticipates posting 100 to 200 jobs in 2020 in addition to taking on approximately 800 former BP employees, effectively tripling its Alaska workforce by the end of the year.

But while job creation and a growing economy are both positive, Anchorage’s population changes are an ongoing concern.

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Popp explained that Anchorage’s population has been on the decline since its peak in 2013 and showed a net loss of approximately 2,600 residents (0.9 percent) in 2019, which brings the total loss since 2013 to 9,200 people (3.1 percent). “The number one issue for the coming decade is where are we going to get people to fill jobs,” Popp said. 

One factor is a changing attitude toward jobs; while Baby Boomers generally moved to any place in pursuit of a quality job, younger generations won’t chase jobs to cities or states that don’t meet their lifestyle standards. “Communities across the United States are competing with communities across the United States to attract and retain a workforce,” he said. Those communities that don’t have a strategy and policies in place to attract a workforce will struggle to build their economies, he explained, “because having to transport a workforce into an area to do business is the most expensive option you can possible expect to have when making an investment.” 

The national unemployment rate is low, as is Alaska’s. However, according to the 2020 Economic Forecast Anchorage report sponsored by Northrim Bank and published by AEDC, “While the national unemployment rate is low, primarily because of sustained job growth, the Anchorage (and Alaska) rate is low because the labor force is shrinking.”

And businesses in Alaska have noticed. In the 2020 Annual Business Confidence Index Report (sponsored by Premera, prepared by the McDowell Group, and published by AEDC) of the top ten barriers to business growth identified by local businesses, four are labor related. The number two barrier identified is the availability of professional/technical workforce; number four is the availability of a semi-skilled workforce; number five is the cost of labor; and number six is the job readiness of entry-level workforce. 

And so one challenge for Anchorage and the state as a whole is how to find and keep qualified, trained workers to make sure the Last Frontier remains a viable place for businesses to thrive.

AEDC has identified a three-prong approach in Anchorage to make it the kind of city in which people want to live, work, and play: revitalizing Anchorage’s downtown, U-Med district, and Chester Creek Greenbelt. “We want to focus our attention to generate revitalization, new investments, and expanded high quality of life elements… to attract a workforce and retain the workforce that we grow locally organically… This strategy is really critical to our next ten years of efforts at AEDC,” Popp stated.

AEDC’s 2020 Economic Forecast Luncheon offered final numbers on net job growth/loss per industry for 2019.

Arie Henry | Alaska Business

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Confidence Mixed with Uncertainty

In the 2020 Annual Business Confidence Index Report, the overall Business Confidence Index dropped 2.8 points to 55.4, which indicates a sense of optimism, if not a great one. As a group, businesses reported the “condition of the state economy” as the largest barrier to business growth in Alaska.

The state’s significant budget gap is large factor, as how the state chooses to spend money—or not—deeply impacts how businesses make their own investment decisions. AEDC asked businesses to vote on their preferred method to close the state’s budget gap. The most highly favored solution amongst businesses is to reduce the PFD (71 percent support, 27 percent oppose it), while the less favored is eliminating the PFD altogether (39 percent support, 61 percent oppose). A statewide sales tax is the next solution with business community support, followed by reductions in state spending, another broad-based statewide tax, and a statewide income tax. 

Other indicators of a health economy are also mixed.

Anchorage’s housing markets remain stable, but Popp explained that’s due in part to slowed residential construction, not because of growing demand for housing. 

Regarding retail, while Alaska was in some ways insulated from national trends in the decline of traditional retail, in the last few years it’s caught up to us. In 2019 Nordstrom, Pier 1, and Bed, Bath, and Beyond all pulled out of Alaska, and Popp said he is aware of other retailers under national pressure that may need to cease Alaska operations in the near future. (As a side note, current rumors that Simon and Seaforts will close soon are entirely unfounded, Popp emphasized; in fact, under new ownership, the Anchorage landmark is likely to see new investment and a long future.)

Part of the reason government jobs are expected to continue to decrease in Anchorage is because of job losses in the University of Alaska system (due to budget cuts) and in the Anchorage School District, which has seen a decrease in student enrollment, which can be reasonably expected to continue as the city’s population continues on a downward trend.

Popp concluded his presentation by stating he does believe Anchorage is nearing the end of the recession, but it’s a tricky call. “This was a difficult forecast for us this year. Our friends at the McDowell Group and my team had numerous discussions about all the influences on what could make things better, and frankly it’s a hot mess,” he stated. But he left the audience with this advice for Anchorage’s future: “We have to start getting involved. We need to get off the sidelines… being positive contributors in policy making, in supporting our schools, and getting out there and doing what needs to be done to make our neighborhoods better and safer… Many of you are doing a lot, but we need everybody to shoulder the wheel… We hope you’ll join us in our efforts to make Anchorage the best city in America to live, work, and play.”

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