State future shaky

Trends point to decline

Posted: Sunday, May 05, 2002

Despite declining oil revenues, Alaska's economy over the past few years has shown remarkable resilience thanks to efforts at diversification, say state labor economists with the Alaska Department of Labor and Workplace Development.

But one suggested this week that Alaska could soon experience the kind of downturn much of the rest of the nation has faced over the past decade because of the sluggishness of the economy's manufacturing and resource-extraction industries.

"Maybe our lean times are coming after the rest of the country," labor economist Dan Robinson said in an interview Thursday.

It is too early to tell how this summer's employment will affect the near-term economy of Alaska, he said, but longer range, the forecast for the economy is decidedly mixed.

"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 an article in the May issue of Alaska Economic Trends, published by the labor 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."

According to labor department forecasts, as many as 47,700 new jobs could be created in Alaska by 2010. Those jobs, however, will come at a pace well below that of the previous two decades and be centered mostly in the economy's services sector, not in the goods-producing sector that historically has sustained the state's economy.

With no mega-project on tap to boost employment, such as a pipeline, indications are that jobs will continue to be lost in oil and gas over the next couple of years at least. Jobs also are expected to fall in ore mining, seafood processing and lumber production.

Construction will add jobs, but the rate of increase will fall from 5 percent in 2001 to 1.3 percent in 2003, according to labor department data.

Longer range, wage and salary jobs will increase at a rate of 1.7 percent per year over the next decade, according to Trends. That's slower than the 2.1 percent annual growth rate of the 1990-2000 decade that saw some 48,623 jobs created, and far below the 3.6 percent annual growth of the halcyon 1980s, when more than 62,000 new jobs became available.

Alaska's population is expected to grow by 43,000 by the end of the decade. That's a modest .6 percent annually. More important, however, is the fact the population also is growing older. As that trend accelerates, so will the demand for services provided by the economy's service sector, which includes such things as health care, transportation, insurance, restaurants and hotels, retail stores and the like.

"The majority of this growth will occur in the over-55 population, providing increased job opportunities in the services sector," according to Trends writers Lorraine Cordova, Gerald Landry and Nels Tomlinson, who also are labor economists with the department.

Indeed, statistics show that the services sector has averaged nearly 5 percent growth per year since 1984, and 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 said.

It's already produced reaction in the health-care delivery industry across the state, including here on the Kenai Peninsula. (See related story, this page.)

The crystal ball isn't nearly as clear or the picture as rosy when it comes to the oil and gas industry, the economists said. The prospect of new drilling in the Arctic National Wildlife Refuge appears dead for now, and the much-ballyhooed natural gas pipeline project is stuck in neutral because the current price of gas is too low to justify building it, according to industry players.

Hence, the Trends forecast made its predictions with a presumption that no pipeline would be built before 2010.

Total oil industry jobs are expected to decline this year, the authors said, but mostly because projects are being completed and temporary positions will be cut, not because of any major loss of full-time jobs.

Trends said that tourism remains a "solid contributor" to the economy. In fact, it is one of the fastest growing industries in the state, affecting services, trade and transportation. The cruise industry was "a major growth engine," according to Trends, which also noted that visitors traveling the Alaska Highway and sailing aboard Alaska's ferries were "the biggest spending visitors to the state."

Trends also said the greatest threat to the Alaska seafood industry is coming from fish farms, which can produce "consistent quality, reliable supply and lower prices." Hopeful signs include improvements in air transportation that have made it easier to get fresh Alaska catch to markets.

The department predicted employment in seafood processing would be relatively flat, growing by just .2 percent by 2010 "as permit holders forgo fishing at low harvest prices and farmed product continues to erode the Alaska market."

Meanwhile, in other sectors, employment in retail sales continues to grow, as does residential construction, while that of the government sector continues to decline, according to Trend.

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