Economists say Alaska recession likely to end in 2019
ANCHORAGE, Alaska (AP) — The longest recession in Alaska history likely will end later this year but the economy will not look very different than it does now, according to longtime Alaska economists.
Economists also warn that resolving Alaska’s state budget deficit with spending cuts alone would have detrimental effects.
Neal Fried, an economist with the Alaska Department of Labor and Workforce Development, said employers are projected to add about 1,400 jobs in 2019, the Alaska Journal of Commerce reported .
That’s positive news but the total would represent only about 0.4 percent growth in the job market.
The state lost about 12,000 jobs since late 2015, when depressed oil prices and ballooning state budget deficits led to contraction of oil, construction and government jobs.
The final numbers for 2018 are still being tallied. Fried and University of Alaska Anchorage economic professor emeritus Scott Goldsmith said final numbers likely will show the state lost about 2,300 jobs last year, a 0.7 percent contraction. That follows losses of more than 4,600 jobs in 2016 and 2017.
Goldsmith said the state is headed toward a “post-recession” period and not a true recovery, which would technically mean a return to pre-recession job levels.
Current employment levels mirror 2011, Fried said.
He and Goldsmith based 2019 projections on stabilized oil prices in the $60 to $70 per barrel range, new oil prospects on Alaska’s North Slope and tentatively stabilized state government spending.
“The declines are declining,” Goldsmith said at a Jan. 16 luncheon.
Alaska was adding jobs at about 0.4 percent annually in the three-year period leading up to the recession, he said.
“If you recall, those were years when oil prices were over $100 per barrel, so one would’ve expected that the economy would’ve been chugging along at a pretty brisk rate, but it really wasn’t, so I think that’s worth thinking about as we move forward,” Goldsmith said.
The oil and gas industry has lost about 5,000 jobs, or more than a third of its Alaska workforce, since 2015. The economists expect the industry will add about 300 jobs in 2019.
Fried predicts Alaska builders will hire 900 more employees this year.
“A recession usually ends with a whimper. What generally happens is the positives get big enough to overwhelm the negatives,” he said.
UAA Institute of Social and Economic Research professor Mouhcine Guettabi said the improved economic outlook is predicated on the Legislature and Gov. Mike Dunleavy not resolving a state $1.6 billion budget deficit with spending cuts alone.
“If that ($1.6 billion) were to get removed from the economy, obviously all of this gets tossed aside,” Guettabi said.
State government spending cuts are the most economically damaging way lawmakers can close the state’s budget gap, according to the institute. ISER estimates $100 million in state operating budget cuts roughly equates to 1,000 or more full-time jobs lost.