Economist predicts more cuts in interest rates

Posted: Friday, February 16, 2001

A Salt Lake City-based economist specializing in Alaska touted the state's future in energy development on Thursday while warning that the state's labor market, like the nation's, would remain tight.

Addressing about 30 people at a luncheon sponsored by KeyBank, Jeff Thredgold spoke some about the state's economy, but mostly addressed the national economy and where he thought it was headed.

State and local labor markets are tight, said the owner of Thredgold Economic Associates. The state unemployment rate averages around 6 percent and Juneau's rate is around 4.5 percent. Both of those figures are near historic lows, he said.

"We are essentially at full employment in Juneau," Thredgold said. When employers are used to having a less restrictive labor market, and it is cut back to historic lows, "it raises the anxiety level about retaining employees."

That came as no surprise to Scott Jensen, owner of Jensen's Home Furnishings. He has seen the tight labor market firsthand. When competing with state government wages, finding and keeping good employees is a real problem, he said.

Thredgold expects the state will add 5,000 to 6,000 jobs each of the next two years, led by trade.

But Alaska's future, like its past, lies in energy development, he said. Having a pro-development president has created a shift in the perception of the state's future, from one of stagnation linked to sluggishness among traditional economies to one of hope in oil and gas development, he said.

He said he believes a natural gas pipeline will be built and that the Arctic National Wildlife Refuge will open for exploration because of increased global demand.

Then there is the pesky problem of the budget. The state eventually will have to deal with its spending and revenue problems, Thredgold said. High oil prices have eased the pressure to deal with the problem, but it's still there, he said.

"The day of reckoning will come," he said.

Nationally, Thredgold said he doesn't expect a recession. An interest rate cut and a tax cut will help boost the economy.

"Those are two very powerful forces at work," he told the Fiddlehead audience.

Thredgold expects interest rates to be cut by 1 percentage point by the middle of the year.

The economy has slowed in recent months and, although it hasn't gone into a recession, it will feel like a recession, he said. When you're going 80 and slow to 20, it feels like you're crawling, he said.

Mike Hinman can be reached at mhinman@juneauempire.com.



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