Prepare for crash while peninsula economy is strong

Posted: Sunday, February 12, 2006

With last year’s dreary news that Cook Inlet natural gas reserves are dwindling, Agrium may close and dropping enrollment could cause even more teachers to be laid off, it’s easy to take a glass-half-empty view of the Kenai Peninsula’s economy.

But there is ample cause for optimism, judging from employment numbers recently released from the Kenai Peninsula Borough.

Jeanne Camp, an analyst with the borough, reports these findings for employment from January 2004 to December 2005:

· The borough’s unemployment rate in December was 9.6 percent, a 0.5 percent improvement over the rate of 10.01 percent in December 2004. Winter typically sees a higher unemployment rate than the average for the year because of the lack of jobs for construction, fishing and other seasonal workers.

Even in this typically slow time of year, though, the 9.6 percent rate of unemployment is better than some entire year averages, including as recently as 2003, when the rate was 10.1 percent, and from 1999 to 1990.

· Last year’s unemployment average is even better news —8.6 percent. This is a 1.1 percent improvement over 2004’s rate of 9.7 percent, and a better number than every year since 1990 expect 2000 and 2001.

· What this means is an average of 264 more people had jobs last year than they did in 2004. The average amount of unemployed workers was 2,140 in 2005, compared to 2,404 in 2004.

· Making these numbers even more significant is the fact that the peninsula’s work force took a substantial leap in 2005. More workers looking for jobs easily could have pushed unemployment numbers up, yet the economy was able to absorb many of these job-seekers. The labor force has jostled upward and down incrementally since 2000, from 24,528 to 24,990 in 2004. Then last year the work force surged ahead to 25,243.

This trend doesn’t look like it’s going to reverse this year, either. Several developments on the horizon look to create even more jobs in the near and farther-range future, and possibly attract more workers to the area — or at least keep some from leaving.

· Wal-Mart has plans in the works for a 235,000-square-foot combination grocery and general merchandise store in Kenai. The city estimates the store could create hundreds of jobs.

· Kenai also will be home to a 139,000-square-foot Lowe’s store and 32,000-square-foot garden center that could create at least 100 jobs.

· Agrium followed its news in early 2005 that it would shut down its Nikiski plant with news that it had negotiated new natural gas contracts that will keep it running through November 2006, albeit at a reduced capacity.

The company also has embarked on the Blue Sky Project. If successful, the endeavor would see the opening of the Beluga coal fields across Cook Inlet. The coal would be used to generate power and processed into gas that would supply Agrium’s facility. The plant could be up to full capacity again, opening up jobs cut in 2005. Other jobs would be available at the coal mines and the coal power and gasification plants. All told, Agrium positions and indirect, support-related jobs could number around 2,000.

· Tesoro had cheery news of its own in 2005. The company plans to build a plant to create low-sulfur diesel that new Environmental Protection Agency regulation will require for highway use. The project could mean hundreds of temporary construction jobs and an untold amount of new positions at the facility.

Of course, no ground has been broken on any of these projects, so it’s premature to count our economic eggs before they hatch.

Even if they do all come to fruition, not all the jobs created will be good ones. Construction work typically only lasts half the year, and entry-level retail jobs don’t always pay enough to keep bills in check. Wal-Mart in particular has a reputation of not offering high-paying jobs or benefits like health insurance and retirement plans.

On one hand, any job for someone desperate for work is a blessing. On the other, meager wages, seasonal positions and no benefits mean employees likely still will seek government help to make ends meet — through food stamps, Medicare and the like. Those costs ultimately are borne by all taxpayers.

While the peninsula’s economic outlook is rosier than it appeared last year, let’s not fool ourselves into thinking we’re so secure that we can put off getting our financial houses in order. The borough especially needs to focus on the goal of keeping its budget in the black and making some tough choices now, whether they be further budget cuts or increased taxes.

Stores can close, building projects can fall through and the inlet’s natural gas reserves still are in decline.

The peninsula’s economic glass is a lot fuller now than it was in the 1990s, but it’s a far sight from overflowing. Now’s the time to build up our reservoir so we can weather whatever dry spell may be on the horizon.



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