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Forecasting Alaska: Economists say jobs recovery could be 3 or more years away

Alaska is projected to see some economic recovery in 2021.
Alaska is projected to see some economic recovery in 2021.(KTUU)
Published: Feb. 3, 2021 at 6:38 PM AKST
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JUNEAU, Alaska (KTUU) - Alaska is projected to see a jobs recovery this year, but economists say it’s likely going to be three or more years before employment numbers return to 2020 levels.

The COVID-19 pandemic saw job losses across the board, the only sector that saw temporary growth in 2020 was the federal government for the U.S. Census.

“This is probably the deepest recession we’ve ever had as far as job losses go,” said Neal Fried, an economist with the Department of Labor and Workforce Development.

Alaska lost over 27,000 jobs in 2020 and is projected to gain back 9,000 jobs in 2021.

Fried said that the recovery would not be evenly distributed across Alaska industries. Hospitality, retail and tourism should bounce back strongly, but the success of those sectors will depend on the strength of the visitor industry and how many cruise ship passengers visit Alaska in the summer.

The oil and gas industry is projected to continue losing jobs in 2021, but at a slower rate than in 2020. “We expect some things to get better, but later in the year,” Fried said.

There are concerns that President Joe Biden’s climate change executive orders could negatively impact the oil and gas sector in the long-term.

The state’s economic recovery in 2021 will also be determined by factors not typically related to economics: how long the COVID-19 pandemic drags on and how quickly Alaskans can get vaccinated.

Nolan Klouda, the executive director of UAA’s Center for Economic Development, said it could take three or more years for the state’s jobs numbers to return to 2020 levels.

The state’s economic recovery was also weak at the end of 2019. “And I think that underlying weakness probably holds us back from growing out of it as fast,” Klouda said.

A complicating factor could be how quickly and strongly the Lower 48 economy recovers.

Fried said there has been a clear link between Alaska’s population numbers and the strength of the Lower 48 economy: When the Alaska economy is relatively weak, more people leave, when it’s strong, more people come to Alaska.

The state has seen consistent population losses for the past eight years.

Larry Persily, a former deputy commissioner of the Revenue Department, said he expects to see the Lower 48 economy recover faster than Alaska.

He also said that if the Alaska Legislature makes big cuts to services that there could be more out-migration. “Schools aren’t very good, universities are being cut. ‘This place is not where I want to raise my family, so it’s a long-term drain on the state. It’s just bad,’” he said.

Alaska’s economists say the state’s economic outlook would have been a lot bleaker had it not been for federal COVID-19 relief. Unemployment checks and stimulus checks are said to have been a big help for consumer spending.

“Those are things that have held up household incomes and probably enabled a lot of spending that wouldn’t have happened otherwise,” Klouda said.

The state’s fiscal challenges remain in the background of Alaska’s economic recovery.

The governor has proposed big Permanent Fund dividends and a bond package to get Alaska back on its feet.

Persily said overdrawing the Permanent Fund sets a dangerous precedent. “There are consequences to spending your money upfront, it means you don’t have it when you need it even more,” he added.

Legislators from across the aisle say the state needs a comprehensive fiscal plan or the consequences will be dire. “We probably have a couple-of-year window, and then you’ll have no dividend and huge taxes,” said Sen. Bert Stedman, R-Sitka.

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