Economists predicted slow and steady growth for the Alaskan and the national economies at the World Trade Center Alaska’s annual economic forecast presentation on Jan. 22.
Pat Burden, president and principle economist of Anchorage-based Northern Economics, said he is predicting 1 percent growth for Alaska’s economy in 2013, or about the rate of population growth. The correlation between population and economic growth in Alaska has been strong for about 25 years, he said.
In his presentation, Burden said he expects the state to add about 5,600 jobs in the coming year to bring the state employment total to roughly 466,000 jobs by the end of 2013.
Despite the projected employment growth, gross state product, or GSP, should hold steady at $53 billion, Burden said. The main factor holding GSP at the 2012 level is the continued decline in state oil production and a steady oil price forecast, he said. A year ago Burden predicted 2012 GSP low at $51 billion.
Nationally, the forecast is “cautiously optimistic,” said Gary Schlossberg, who is vice president and senior economist for Wells Capital Management.
“We are in the middle of an adjustment to the aftershocks of the financial meltdown,” Schlossberg said. “The housing market in the Lower 48 at least, is on its way to recovery. The economic growth cycle is being led by the improvement in housing.”
Existing home sales were up 14 percent year-over-year for November 2012 according to the most recent data available from the U.S. Department of Housing and Urban Development.
Schlossberg attributed the growth in home sales to the lowest consumer debt levels in 10 years, allowing banks to lend more.
Growth is expected to be greatest in the service sectors of Alaska’s economy. Burden is predicting 6 percent growth — $430 million — in the state’s financial and service industries. Health care and education fields are expected to add a combined 1,700 jobs to their current workforce, equating to 3.1 percent growth. About 1,200 new finance jobs should become available as well, growing that industry by 2.5 percent.
Construction and manufacturing, which includes the seafood processing industry, is expected to grow by $190 million, or 5 percent in 2013. Tied to that growth will be 1,200 new industry jobs, Burden said.
Alaskan exports are expected to grow by $130 million, or about 4 percent over the coming year. In 2012, the state exported $4.5 billion worth of goods, which made up about 8.5 percent of total GSP, according to U.S. Department of Commerce statistics. While that puts Alaska 40th in the nation in terms of total exports, the state is fourth in export dollars per capita.
Oil prices and declining production are a long-term threat to Alaska’s economy, Burden said. Oil production is up 600 percent in North Dakota and 60 percent in Texas over the past 10 years. In Alaska it’s down 46 percent over that time, he said.
Burden said the price of West Texas Intermediate, or mid-continent produced oil, has historically been lower than Alaska North Slope, or ANS oil. ANS is typically priced at or just below imported crude on the West Coast. In recent years West Texas Intermediate has traded about $20 below ANS. That gap has started to shrink, Burden said, most recently down to a $16 differential.
Burden said ANS prices could begin a more permanent slide because increases in mid-continent production could reduce the demand for Alaska oil in West Coast markets.
“It’s really going to be a matter of how much rail capacity and pipeline capacity people will start using to move oil from the middle of the U.S. and western Canada to the (West) Coast,” he said.