Alaska could face economic downturn

Posted: Monday, May 06, 2002

KENAI - Despite declining oil revenues, diversification has given Alaska's economy remarkable resilience in recent years, say state labor economists. But sluggishness in Alaska's manufacturing and resource-extraction industries could bring a Lower 48-style recession, one state economist suggests.

"Maybe our lean times are coming after the rest of the country," labor economist Dan Robinson of the Department of Labor and Workforce Development told the Peninsula Clarion last week.

"The current forecast for 1.4 percent job growth in 2002 and 1.3 percent in 2003 suggests that Alaska is still searching for its economic path in the face of shrinking employment in the commodity-producing industries that have shaped the state's economic history," Robinson wrote in the May issue of Alaska Economic Trends, published by the department.

"The question remains whether the state can continue to add jobs in areas such as services and retail trade - industries often considered derivative - without also adding jobs in the goods-producing sectors."

Wage and salary jobs are expected to increase at a rate of 1.7 percent per year over the next decade, providing 47,700 new jobs by 2010.

But that's far slower than the 2.1 percent annual growth rate of the 1990-2000 decade when 48,623 jobs were created. And the employment gains will come in the lower-paying services sector.

Jobs will continue to be lost in oil and gas over the next couple of years at least, according to department projections. Mining, seafood processing and lumber production are also expected to need fewer workers.

Construction will add workers, but the rate of increase won't match the 5 percent gain in 2001, the department says. It projects a gain of just 1.3 percent in 2003.

Alaska's population is expected to grow by 43,000 by the end of the decade. That's a modest 0.6 percent annually.

But the state's population also is growing older. That will increase demand for services such as health care, transportation, insurance, and restaurant meals.

The services sector has averaged nearly 5 percent growth per year since 1984. Within that sector, health and social services employed nearly 40 percent of all workers. That dominance is likely to continue as the over-55 group grows, the economists say.

The crystal ball isn't clear when it comes to the oil and gas industry, but jobs are expected to decline this year, mostly because projects are being completed and temporary positions will be cut. That trend could continue for another year or even longer if a big project such as a natural gas pipeline fails to materialize.

Tourism remains one of the fastest growing industries in the state, with cruise ship passengers and visitors arriving in their own vehicles spending money on services within Alaska.

The department predicts employment in seafood processing will be relatively flat, growing by just 0.2 percent by 2010 "as permit holders forgo fishing at low harvest prices and farmed product continues to erode the Alaska market."

Jobs in retail sales and residential constriction are expected to continue growing, according to the economists, while the government sector continues to decline.

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